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Bail-out policy loses sight of fairness

20 Nov 08

The government’s insistence that “it’s our way or no way” on the Lloyds TSB/HBOS merger means there is no level playing field.

Another milestone has been passed on the road to a merged Lloyds TSB/Bank of Scotland, with the Lloyds TSB shareholders voting by a massive 95.98 per cent in favour of the deal.

There’s likely to be more dissent when it comes to the HBOS shareholders. Meanwhile, this week Chancellor of the Exchequer Alistair Darling stressed that the offer to recapitalise the banks with public money was not an entitlement. Although he didn’t say explicitly that help for HBOS would only be available subject to the merger going through, his comments that it would depend on a “credible” management team have been interpreted as a slap to ongoing attempts to put together a package that ensures HBOS’s independence.

When the merger proposal was announced, we were at the height of the banking crisis and HBOS, along with other institutions, looked on the brink of collapse. At that time, the government’s announcement that normal competition considerations could be waived to allow the merger to go through seemed a reasonable response to the emergency.

Now, however, it seems that the government is so committed to the Lloyds TSB/HBOS deal that all notions of fairness have been set aside. It may well be the best deal available as for as the UK economy is concerned – and so far it is the only deal on the table – but if so let’s see how it stacks up against an alternative. Surely there should be a level playing field for those looking to preserve HBOS and the Bank of Scotland?

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HBOS | Lloyds TSB | Bank of Scotland
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