Lloyds Banking Group hopes to be able to save about £1bn in interest payments over five years by buying back bonds it issued shortly after the financial crisis.
The bailed-out bank had been blocked from forcing holders of the bonds – which paid rates of between 6% and 16% – to receive only their face value earlier in the year. At the time, private investors convinced the high court that Lloyds should not be allowed to take such action.
But that decision was overturned on Thursday when the civil division of the court of appeal said Lloyds was allowed to redeem the bonds, known as enhanced capital notes.
Lloyds first initiated its efforts to cash in the ECNs a year ago, when the Bank of England refused to count them as part of its capital cushion during stress tests. Lloyds was close to the hurdle rate set by the Bank during the annual assessment of banks’ financial health last year.
Mark Taber, the activist who led the campaign and was also involved in securing better terms for holders of bonds in the Co-operative Bank during its crisis in 2013, said: “There should be rules in place to protect consumers who should not have to mount hugely expensive and time-consuming campaigns to protect themselves from banks acting in this way.”
