Journalists helped to avert financial ruin at Britain’s biggest mortgage lender when they refused to run stories based on malicious rumours that the bank had ran out of money.
City and financial reporters and editors on almost every national newspaper refused to publish the widespread and untrue rumour that HBOS, the parent company of high street banks Halifax and the Bank of Scotland, had gone to the Bank of England for financial help – as Northern Rock had done in September last year.
Last Wednesday, the company’s share price dropped 17 per cent, the equivalent of more than £3bn, as traders were spooked by the false allegations. By Tuesday this week, the share price had surged 15 per cent as staff and directors bought £6m-worth of shares.
It had been alleged in several mysterious emails sent to various newspapers that the Financial Times was about to break the story of HBOS’s demise.
Last Friday, The Sun was contacted several times by a tipster known only as ‘Ben”, who tried to convince the paper’s newsdesk that the bank was in trouble.
Claiming to be a senior banking executive, he told deputy news editor Ben O’Driscoll: ‘I’ve got a story bigger than the Northern Rock one. A major bank has stopped all lending.”
The Sun refused to run the story, after the man failed to supply an email he said proved his claim or say where he worked. He called again, demanding £20,000 in return for the name of the bank.
Within two hours of HBOS’s share drop, City watchdog the Financial Services Authority had launched a massive investigation into allegations of short-selling – where traders profit from cashing in on a company’s falling share price.
The Bank of England took the rare step of contacting senior commentators and newsdesks on newspapers, broadcasters and newswires to quash the rumours.
Alex Brummer, City editor and chief financial commentator at the Daily Mail, said journalists were ‘hyper-sensitive’about the turmoil in global markets and had been careful not to cause any panic among savers and homeowners.
He said: ‘Here we are in a particularly volatile place – and once [a rumour] appears in a headline, we saw what happens with Northern Rock. The queues spin around the block [outside the bank].
‘You’ve got to nip it in the bud. Banks are in many ways a special case because confidence drains away from them very, very rapidly. When you are dealing with banks, you have to be responsible.”
Deborah Hargreaves, business editor of The Guardian, said the only way to cover these stories responsibly was to report the effect it was having on the company.
‘It’s a difficult thing to cover, because you don’t report on rumours unless you can stand them up. You’ve obviously got to put it to the institution or the bank.