Every now and then things that were not foreseen as being capable of going wrong go wrong. For instance, at Amigo (AMGO) the judge delayed resolution of matters for so long that Amigo’s overheads went on draining away to no effect. Given that the law, it transpired, was intended to protect those who were owed money by Amigo one might reasonably observe that the law in practice failed.
Perhaps we are looking at a similar, if not as dramatic, impasse at Close Brothers (CBG). Here it is claimed that CBG have been lending on a massive scale to consumers who need finance to buy motor cars whilst CBG have been taking commission from garages that wish to sell cars. The market’s initial reaction was to ponder whether the loan was recoverable at all. However – deep breath – it seems that only the “excess interest”, whatever this is deemed to be, must be refunded by CBG to the borrowers.
However, the delay could be anything as civil servants gather their thoughts (why does “gathering” take so long?) and, as a result, CBG is poleaxed in relation to the proper conduct of their business. CBG are down a further 100p+ today at 290p, and CBG as a stock is uninvestable pending a full clarification. I would have thought that some bright spark at the BoE, concerned with banking stability, would demand that matters are attended to immediately. I do not know whether CBG is a short since I am not familiar with CBG as a whole.