Halifax Bank of Scotland

HBOS Head Office^[1]

Formed from the merger of the Halifax Building Society and Bank of Scotland in 2001, and head quartered in Edinburgh, with 22 million customers and assets of over £540 billion^[2], HBoS ranks third in the list of Scotland's top 500 companies and is the seventh largest bank in Europe.^[3] The company employs around 68,000 staff.

The HBoS is one of the largest commercial sponsors of sport and the arts in Scotland, to the tune of £19.5 million in 2003, and is best known for its sponsorship of the Scottish Premier League.

HBoS subsidiaries also include considerable interests in Australia where it is said to have expansion plans:^[4] Bank of Western Australia Ltd, BankWest, Capital Finance and St Andrews Insurance; and UK companies Clerical Medical, Birmingham Midshires, Capital Bank, Godfrey Davis, Lex Vehicle Leasing, Hill Hire Plc, Sainsbury's Bank, BM Solutions; The Mortgage Business; Rightmove; First Alternative; Esure; Employee Share Services; Mentor Professional Services; St Andrews Group, St James's Place Bank, St James's Place Group (formerly known as St James's Place Capital Plc), and of course Banco Halifax Hispania, Bank of Scotland (Ireland) and Bank of Scotland (The Netherlands).

HBoS investments

Unlike the Royal Bank of Scotland, HBoS is less involved in overseas project finance. Since 2002 the Bank of Scotland consolidated its position as a leader in PPP/PFI type finance, bringing the first such deal to France as a partner in the construction of a new motorway.^[5] In 2004 it won a major share in an Australian PFI initiative, another road-building project.^[6] In 2004 the Bank of Scotland part-funded a £35m PPP/PFI deal with the City of Edinburgh Council for the Edinburgh Schools Partnership for the design, construction, financing and operation of 4 schools.^[7]

In Glasgow the 3ED consortium, involving the Miller Group construction company, the Halifax bank (now HBoS) and Hewlett Packard computers, will organise construction and retain operational control of the school buildings for the next 29 years. The city council will rent the buildings from 3ED for an annual fee of £40.5 million, an arrangement that is guaranteed to continue for the next 30 years, allowing 3ED to re-coup £1.2bn. This move had been prepared for by the closure of 9 secondary schools in Glasgow, with a population of 30,000 pupils.

HBoS finances Wood McKenzie, a Scottish oil and gas consultancy firm also involved in Caspian oil and gas.^[8]

In 2002 HBoS financed Philip Green's take-over of Arcadia, the retail group which owns high street brands such as Topshop, Miss Selfridge, Dorothy Perkins and Burtons.^[9] No Sweat UK has reported union repression and low wages in this group. Factories in London's Whitechapel producing goods for Arcadia were found to be paying substantially under the minimum wage, and other UK suppliers claimed that the company paid so little that they could not provide better wages or working conditions. In Bombay in 2002 there were reports of intimidation of union members, including harassment, physical assault and reduced work.^[10] In 2004, Philip Green wrote himself a cheque for 3460 million as a result of profits from Arcadia,^[11] and the remainder went to HBoS, which holds the other 8% of the company.^[12]

HBoS and 'ethical investment'

In 2002 HBoS launched asset manager, Insight Investment, which later that year started up an 'Investor Responsibility Service' which aimed to make it easier for 'institutional investors to demonstrate a commitment to addressing corporate responsibility issues, without compromising their financial objectives.'^[13] Rather than limiting the companies in which it invest, Insight Investors favours the 'constructive engagement' approach, hosting conferences and organising meetings. Thus, rather than withdrawing investment from environmentally destructive energy and mining companies,it invites senior managers to seminar about, for example, biodiversity and management of fragile ecosystems.^[14] The major companies invested in include: BAE Systems, BP, British Airways, Cairn Energy, Cadbury Schweppes, Diageo, Easyjet, GlaxoSmithKline, J Sainsbury's, Marks and Spencer's, Safeway, Scottish and Southern Energy, ScottishPower, Shell, Tesco, Tullow Oil and Unilever.^[15] The actual benefit of such investment in changing companies' ethical behaviour has yet to be demonstrated.

HBoS failing its poorer customers

The Guardian reported that in November 2004, HBoS began charging up to £1.75 for cash withdrawals from its cash machines. This will hit lower income customers hardest especially those who have to use cash machines to withdraw benefits and pensions. With the closure of so many post offices in recent years, withdrawing benefits from cash machines is becoming more and more common.^[16]

HBoS and accounting mismanagement

HBoS was fined £1.25 million in January 2004 for failing to protect against money laundering - they conducted an internal survey in 2002 and could not find records of necessary customer identification documents in 55% of cases.^[17] This is an astonishing statistic, suggesting that although the bank should have scrutinised all their customers' accounts when money laundering legislation came into force, it did not do so.

People

The Chairman of the Board is Dennis Stevenson. In addition there are five executive directors and eight non-executive directors, including Sir Ronald Garrick who is the deputy chairman.

• Dennis Stevenson

Executive directors

• James Crosby
• Phil Hodkinson
• Andy Hornby
• Colin Matthew
• Peter Cummings

Non-Executive Directors

• Sir Ronald Garrick
• Charles Dunstone
• Tony Hobson
• Brian Ivory
• Coline McConville
• Kate Nealon
• David Shearer

Spinners and lobbyists

• Duncan Cantor
• Phil Hodkinson, Corporate Responsibility Forum
• Shane O'Riordain, General Manager, Group Communications, Vizard's boss.
• Liza Vizard
• Karl Snowden

Highprofile shareholders

Former employee Stewart Stevenson, currently Member of Scottish Parliament for Banff and Buchan has declared an interest in HBoS on the Register of Member's Interests - retaining HBoS ordinary stock of nominal value £10,250 (market value, approximately £410,000). He has has other declared shareholdings, in Scottish Power and Scottish & Southern Electricity^[18].

Controversies

In 2006 the Christmas savings hamper company Farepak, owned by European Home retail collapsed because it could no longer meet its commitments to make deliveries to its customers. Halifax Bank of Scotland had provided an overdraft facility to European Home Retail, and the decision not to extend the overdraft eventually led to administrators being called in. The Bank had come into criticism after more than 150,000 customers, mainly on low incomes, lost an average of £400 each, although some lost closer to £2,000 because it had rejected a number of options that may have enabled Farepak to continue trading^[19].

After receiving much negative media attention, HBOS responded to the criticism over its role in the Farepak collapse by giving £2m to the Family Fund, a Yorkshire-based charity administering the Farepak Response Fund, set up to help victims of collapsed firm ^[20].

Though in December 2006 HBOS launched an attack on customers of the failed Christmas club, claiming that a lack of gratitude may have deterred donations to a charity fund ^[21].

Funding

HBOS is a member and funder of a number of external organisations and bodies. The charitable work of HBOS is carried out predominately through the HBOS Foundation^[22].

Affiliations

HBOS is affiliated and involved with a number of other organisations including Forum for the Future.

Notes

1. ^ HBoS Headquarters, last viewed 21/02/07
2. ^ About HBoS , last viewed 01.02.07
3. ^ Scottish Enterprise About Scotland Keyfacts, last viewed 31.01.07
4. ^ 'HBoS cultivates down under for growth' Sunday Herald 28 November 2004
5. ^ Scottish Enterprise website last viewed 31.3.05
6. ^ 'HBoS cultivates down under for growth' Sunday Herald 28 November 2004
7. ^'Bank of Scotland Exports UK lead in PFI/PPP to Europe,' 05.07.02 www.hbosplc.com/media/pressreleases/articles/bos/2002-07-05-02.asp. Last viewed 16.3.05
8. ^Iain Dey, 'HBOS drives ahead with Australian PFI' 17/10/04 The Scotsman http://business.scotsman.com/topics.cfm?tid=497&id=1206572004
9. ^Scottish Business Insider
10. ^'Caspian & Black Sea Oil and Gas Conference 2004 Key Facts' http://www.kievturk.com/?m=news&page=2&newsid=7. Last viewed 16.3.05
11. ^Julia Finch, 'Green gains £460m in Arcadia,' The Guardian 22.10.04 http://www.guardian.co.uk/business/story/0,,1333029,00.html Last viewed 23.03.05
12. ^'A Partial Victory for Bed and Bath workers,' http://www.nosweat.org.uk/article.php?sid=468. Last viewed 16.3.05
13. ^Julia Finch, 'Green gains £460m in Arcadia,' The Guardian 22.10.04 http://www.guardian.co.uk/business/story/0,,1333029,00.html Last viewed 23.03.05
14. ^Philip Green pockets £460m dividend from Arcadia http://business.scotsman.com/topics.cfm?tid=368
15. ^'Insight Investment launches investor responsibility service,' 23.11.02 http://www.csrwire.com/bsr/article.cgi/1422.html Last viewed 23.03.05
16. ^Insight Investment, 'Biodiversity: towards best practice for extractive and utility companies' 13.11.03 http://www.wbcsd.ch/web/projects/cement/tf5/biodiversity_consultation_document.pdf last viewed 23.03.05
17. ^'Insight's engagement and voting 2003' http://www.insightinvestment.com/responsibility/reporting/select_a_company_by_event.asp?1=A&2=A&yr=2003. Last viewed 16.3.05
18. ^Philip Inman, 'Taxed at the cash machine' Philip Inman, The Guardian 27.11.04 http://www.guardian.co.uk/guardian_jobs_and_money/story/0,,1360379,00.html last viewed 23.03.05
19. ^Heather Tomlinson, 'HBOS flouted dirty money rules' 16/1/04 The Guardian http://money.guardian.co.uk/saving/banks/story/0,12410,1124473,00.html
20. ^BBC News, Farepak boss 'sorry' for collapse, last accesed 21/02/07
21. ^ Levene, T. (2006) HBOS gives to Farepak charity after criticism, last accessed 21/02/07
22. ^ Womack, S. (2006) Farepak bank: be far more grateful. Financial Mail on Sunday; London. 17/12/06
23. ^ Living Book Website, last accessed 21/02/07