This blog gives you the latest topical news plus some informal comments on them from ShareSoc’s directors and other contributors. These are the personal comments of the authors and not necessarily the considered views of ShareSoc. The writers may hold shares in the companies mentioned. You can add your own comments on the blog posts, but note that ShareSoc reserves the right to remove or edit comments where they are inappropriate or defamatory.

Lloyds Banking Group ECN Scandal

Lloyds Bank issued Enhanced Capital Notes (ECNs) as part of its refinancing during the banking crisis. These were taken up by many retail investors. They were convertible bonds that the bank has the right to convert to equity or buy back if its core capital falls below a certain level. During recent Bank of England stress test, regulators ruled that the bonds no longer constituted part of the bank’s capital, triggering the possibility of redemption which Lloyds Bank is proposing to do. As a result the market value of the bonds has abruptly fallen and the income from them will disappear. The bonds were issued in exchange for older high yielding bonds, preference shares and PIBS issued by former building societies.

Now Mark Taber of Fixed Income Investments has taken up the issue and is alleging that the original definition of core capital has been changed, and that the investors who accepted the exchange of their previous bond holdings were misled into accepting them, i.e. they were mis-sold these bonds. He also suggests that the regulators are conflicted.

If you hold these bonds, please go to Mark’s web site at

for more information and to register your interest.

Roger Lawson

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