I’m still ploughing through the Independent Commission on Banking’s interim report. But I admit to a tinge of surprise that the Commission was so critical of government the merger of Lloyds TSB with HBOS. This was very much a Gordon Brown initiative.
The Interim Report looks at effects of reversing the merger to improve competitiveness in the UK retail banking market, and concludes that the merger is to far gone to unravel. Here are the parts of their report reviewing the original decisions:
5.33 The acquisition of HBOS by Lloyds TSB was facilitated by a decision on 31 October 2008 by the Secretary of State for Business not to refer the merger to the Competition Commission. Normally merger reference decisions are for the OFT to determine. The OFT’s view was that there was a realistic prospect that the merger might result in a substantial lessening of competition in PCAs, banking services to SMEs and mortgages such that further inquiry by the CC was warranted. Thus the merger would have been referred to the CC but for the Government intervention.
5.34 Although the acquisition by Lloyds TSB gave temporary respite to HBOS, it jeopardised Lloyds TSB. Large sums of public money had to be injected into the merged entity, which was renamed LBG, with the result that the Government now owns 41% of the group.
5.37 There is cause for regret that the Government in 2008 amended competition law to facilitate the Lloyds TSB/HBOS merger, …
So, there you have it. Gordon Brown’s decision jeopardised a good bank in Lloyds TSB, reduced competition, and left the taxpayer to stump up vast sums of money.