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Lloyds accused of devaluing business property to force customers into default

13 July 2015

It’s been reported that a number of Lloyds Bank business customers have wrongly been put into default after their property and commercial assets were undervalued by the bank.

In the Banking Report 2015 by Manchester Law firm, Berg, it is claimed Lloyd’s ulterior motive was to essentially wash their hands of the struggling businesses in order to save money and improve profit. By lowering property valuations (and putting customers in breach of the loan to value (LTV)), companies would be unable to pay off the loans, putting them at risk of going into administration or going bust. The report suggests the bank would be in a better position if loans default:

“If the business with the facility were to default or become insolvent, the bank could remove it from the list of assets on its balance sheet, thereby reducing, quite drastically, the amount of revenue it must hold. That releases much needed cash to the bank to reinvest elsewhere at significantly higher profit margins.”

To request the free full report, visit Berg’s website. The report also looks at the current relationship between banks and SMEs, taking into account previous mis-selling practices and lending issues faced by the business community as well as insights on the future of bank lending.

Lloyds has denied all claims of wrongdoing and suggests the actions they are accused of would actually harm their position, making the claims nonsensical. A spokesperson said the bank would “not benefit in any way from falsifying values”. 

Over the last year and a half, there have been ongoing claims against another major bank, RBS, and its handling of business customers, with accusations that the bank forced companies to go bust to improve its own finances. Its Global Restructuring Group (GRG) has since been shut down following investigations.

Managing Partner of Berg, Alison Loveday, recently spoke about the banks’ mis-selling swaps scandal at our networking events hosted in Manchester and London. Browse her presentation from February here. Loveday also spoke on BBC Breakfast back in 2013 about the scandal and the subsequent fine of £390 million issued to RBS.