Note 34: Contingent liabilities, commitments and guarantees
Contingent liabilities, commitments and guarantees
At 31 December 2024 contingent liabilities, such as performance bonds and letters of credit, arising from the banking business were £ 98 million
(31 December 2023: £109 million).
The contingent liabilities of the Group arise in the normal course of its banking business and it is not practicable to quantify their future
financial effect. Total commitments and guarantees were £ 65,069 million (31 December 2023: £60,718 million), of which in respect of undrawn
formal standby facilities, credit lines and other commitments to lend, £ 18,025 million (31 December 2023 : £13,967 million ) was irrevocable.
Capital commitments
There was no capital expenditure contracted but not provided for at 31 December 2024 ( 2023 : £nil).
Interchange fees
With respect to multi-lateral interchange fees (MIFs), the Lloyds Banking Group is not a party in the ongoing or threatened litigation which
involves the card schemes Visa and Mastercard or any settlements of such litigation. However, the Group is a member/licensee of Visa and
Mastercard and other card schemes. The litigation in question is as follows:
• Litigation brought by or on behalf of retailers against both Visa and Mastercard in the English Courts, in which retailers are seeking damages
on grounds that Visa and Mastercard’s MIFs breached competition law (this includes a judgment of the Supreme Court in June 2020
upholding the Court of Appeal’s finding in 2018 that certain historic interchange arrangements of Mastercard and Visa infringed competition
law)
• Litigation brought on behalf of UK consumers in the English Courts against Mastercard
Any impact on the Group of the litigation against Visa and Mastercard remains uncertain at this time, such that it is not practicable for the
Group to provide an estimate of any potential financial effect. Insofar as Visa is required to pay damages to retailers for interchange fees set
prior to June 2016, contractual arrangements to allocate liability have been agreed between various UK banks (including the Lloyds Banking
Group) and Visa Inc, as part of Visa Inc’s acquisition of Visa Europe in 2016. These arrangements cap the maximum amount of liability to which
the Lloyds Banking Group may be subject and this cap is set at the cash consideration received by the Lloyds Banking Group for the sale of its
stake in Visa Europe to Visa Inc in 2016. In 2016, the Lloyds Banking Group received Visa preference shares as part of the consideration for the
sale of its shares in Visa Europe. A release assessment is carried out by Visa on certain anniversaries of the sale (in line with the Visa Europe sale
documentation) and as a result, some Visa preference shares may be converted into Visa Inc Class A common stock from time to time. Any such
release and any subsequent sale of Visa common stock does not impact the contingent liability.
LIBOR and other trading rates
Certain Lloyds Banking Group companies, together with other panel banks, have been named as defendants in ongoing private lawsuits,
including purported class action suits, in the US in connection with their roles as panel banks contributing to the setting of US dollar, Japanese
yen and Sterling London Interbank Offered Rate.
Certain Lloyds Banking Group companies are also named as defendants in (i) UK-based claims, and (ii) two Dutch class actions, raising LIBOR
manipulation allegations. A number of claims against the Lloyds Banking Group in the UK relating to the alleged mis-sale of interest rate
hedging products also include allegations of LIBOR manipulation.
It is currently not possible to predict the scope and ultimate outcome on the Lloyds Banking Group of any private lawsuits or ongoing related
challenges to the interpretation or validity of any of the Lloyds Banking Group’s contractual arrangements, including their timing and scale. As
such, it is not practicable to provide an estimate of any potential financial effect.
Tax authorities
The Group has an open matter in relation to a claim for group relief of losses incurred in its former Irish banking subsidiary, which ceased
trading on 31 December 2010. In 2020, HMRC concluded its enquiry into the matter and issued a closure notice denying the group relief claim.
The Group appealed to the First Tier Tax Tribunal. The hearing took place in May 2023. In January 2025, the First Tier Tribunal concluded in
favour of HMRC. The Group believes it has applied the rules correctly and that the claim for group relief is correct. Having reviewed the
Tribunal’s conclusions and having taken appropriate advice, the Group intends to appeal the decision and does not consider this to be a case
where an additional tax liability will ultimately fall due. If the final determination of the matter by the judicial process is that HMRC’s position
is correct, management believes that this would result in an increase in current tax liabilities of approximately £420 million (including interest).
Following the First Tier Tax Tribunal outcome, the tax will be paid and recognised as a current tax asset, given the Group’s view that the tax
liability will not ultimately fall due. It is unlikely that any appeal hearing will be held before 2026, and final conclusion of the judicial process
may not be for several years.
There are a number of other open matters on which the Group is in discussions with HMRC (including the tax treatment of costs relating to
HBOS Reading) none of which is expected to have a material impact on the financial position of the Group.
Arena and Sentinel litigation claims
The Group is facing claims alleging breach of duty and/or mandate in the context of an underlying external fraud matter involving Arena
Television. The Group is defending the claims, which are at an early stage. As such, it is not practicable to estimate the final outcome of the
matter and its financial impact (if any) to the Group.
FCA investigation into the Lloyds Banking Group’s anti-money laundering control framework
As previously disclosed, the FCA had opened an investigation into the Lloyds Banking Group’s compliance with domestic UK money laundering
regulations and the FCA’s rules and Principles for Businesses, with a focus on aspects of its anti-money laundering control framework. This
investigation has now been closed by the FCA without any enforcement action taken.
Other legal actions and regulatory matters
In addition, in the course of its business the Group is subject to other complaints and threatened or actual legal proceedings (including class or
group action claims) brought by or on behalf of current or former employees, customers (including their appointed representatives), investors
or other third parties, as well as legal and regulatory reviews, enquiries and examinations, requests for information, audits, challenges,
investigations and enforcement actions, which could relate to a number of issues. This includes matters in relation to compliance with
applicable laws and regulations, such as those relating to prudential regulation, employment, consumer protection, investment advice, business
conduct, systems and controls, environmental, sustainability, competition/anti-trust, tax, anti-bribery, anti-money laundering and sanctions,
some of which may be beyond the Group’s control, both in the UK and overseas. Where material, such matters are periodically reassessed, with
the assistance of external professional advisers where appropriate, to determine the likelihood of the Group incurring a liability. The Group
does not currently expect the final outcome of any such case to have a material adverse effect on its financial position, operations or cash
