Page last updated at 17:00 GMT, Friday, 31 October 2008

Lloyds TSB's HBOS deal is cleared

Peter Mandelson
The Lloyds TSB and HBOS merger has been given the go-ahead

Business Secretary Lord Mandelson has cleared the planned merger between Lloyds TSB and HBOS after ruling the deal was in the public interest.

"Preserving the stability of the financial system" outweighed any potential anti-competitive effects, he said in a statement.

There was no need to refer the deal to the Competition Commission, he added.

The Office of Fair Trading had reported that competition could be affected by the planned merger.

The tie-up between the two institutions will create a bank which will control about 25% of British customers' personal bank accounts and about 28% of the mortgage market - which would normally have raised competition concerns.

But the British government has relaxed the competition rules, in the interest of maintaining the stability of the British banking system.

There has been some opposition to the move in Scotland, with the Scottish National Party and Liberal Democrats calling for the deal to be re-examined to see if HBOS could survive on its own under the recapitalisation scheme.


In its report last week, on the impact of the deal on competition in the UK banking sector, the Office of Fair Trading said there could be a "substantial lessening of competition" in personal current accounts, bank services for smaller firms and the mortgage market.

In his statement, Lord Mandelson said: "I recognise that there are some concerns about the possible effects of the merger on competition.

"I am asking the Office of Fair Trading to continue to keep the relevant markets under review in order to protect the interests of UK consumers and the British economy," he added.

Earlier, Prime Minister Gordon Brown said HBOS would not exist, had it not been for the public bail-out of the bank.

This is not a done deal because shareholders have yet to see a proposal
Tavish Scott
Scottish Lib Dem leader
"We were faced with a situation where the Halifax Bank of Scotland was collapsing, where they could not continue to function. And we helped make possible the only bid that was available at that time, [from] Lloyds TSB," he said.

Mr Brown said he was "absolutely sure" that without the government's rescue, "HBOS would not exist".

Lloyds has said it expects to complete its takeover of HBOS by January, after shareholders vote on the deal in November.

However, Tavish Scott, leader of the Scottish Liberal Democrats, said the OFT report found the takeover would be "bad news" for Scottish customers.

"The OFT makes it clear that personal and business customers in Scotland will lose out the most," said Mr Scott.

"This is not a done deal because shareholders have yet to see a proposal.

"The biggest shareholder of all, the taxpayer, is deeply concerned by job losses and the loss of the headquarters, a view clearly expressed in the Scottish Parliament yesterday."

Scotland's first minister said the report underlined the need for a "full and proper" examination of a merger.

Alex Salmond said: "The OFT report quite clearly shows that as well as concerns about jobs and decision-making, there are also major questions about a substantial loss of competition for individuals and businesses in Scotland - with specific issues raised about the impact north of the border."

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