Lloyds Granted Partial Anti-trust Immunity in Take-over of Failing Rival, HBOS
As central banks scramble to provide emergency funds and increase liquidity in financial markets around the world, the British government has arranged a deal to save one of its largest mortgage lenders. Based upon arrangements spearheaded by the Brown administration, Lloyds TBS Group has agreed to purchase the mortgage lender HBOS Plc. at a price of €12 billion. HBOS was at risk of collapse and the move is seen as a rescue plan that is likely to shore up an institution that has truly global affects.
Blessings from the Brown administration include suspension of key competition rules put in place just a few years ago to avoid precisely this sort of political interference in the free market. The UK’s 2002 Enterprise Act contains a provision that permits officials to waive anti-trust requirements “in certain public interest cases.” The seriousness of financial conditions does not guarantee that the deal will escape review from all competition regulators, however.
Great Britain’s Office of Fair Trading is expected to scrutinize the deal to determine whether or not it is in the best interest of consumers. Specifically, among its chief tasks will be to determine whether the combined bank will be large enough to unfairly abuse its dominant position to artificially control competition in the British lending market, including but not limited to home mortgages.
If shareholders approve the deal, the combined bank will reach massive proportions with nearly one third of the British mortgage market and a quarter of the Kingdom’s savings accounts. The combined entity will boast more than 3,000 branch locations, about 700 more than its nearest competitors. Shareholders will receive .83 shares of Lloyds shares for each single they held in HBOS stock.
Great Britain’s Office of Fair Trading is a government watchdog charged with ensuring consumer protection, including the power to investigate proposed mergers and halt them if consumers protections are deemed inadequate.
The OFT will need to attempt to balance concerns of ensuring robust competition, and hence consumer protection, against financial stability in the marketplace. In 2001, the OFT blocked a Lloyd’s takeover of another UK banking institution, Abbey, due to the potential for an “adverse impact on consumer choice.”
The European Commission, charged with responsibilities including scrutinizing mergers of European institutions, is not likely to have jurisdiction over this deal due to the domestic nature of both Lloyds ad HBOS.
HBOS’s stocks have lost more than half their value in recent weeks.
The OFT is currently in the midst of an investigation into the British banking sector over bank charges.
About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.
Blessings from the Brown administration include suspension of key competition rules put in place just a few years ago to avoid precisely this sort of political interference in the free market. The UK’s 2002 Enterprise Act contains a provision that permits officials to waive anti-trust requirements “in certain public interest cases.” The seriousness of financial conditions does not guarantee that the deal will escape review from all competition regulators, however.
Great Britain’s Office of Fair Trading is expected to scrutinize the deal to determine whether or not it is in the best interest of consumers. Specifically, among its chief tasks will be to determine whether the combined bank will be large enough to unfairly abuse its dominant position to artificially control competition in the British lending market, including but not limited to home mortgages.
If shareholders approve the deal, the combined bank will reach massive proportions with nearly one third of the British mortgage market and a quarter of the Kingdom’s savings accounts. The combined entity will boast more than 3,000 branch locations, about 700 more than its nearest competitors. Shareholders will receive .83 shares of Lloyds shares for each single they held in HBOS stock.
Great Britain’s Office of Fair Trading is a government watchdog charged with ensuring consumer protection, including the power to investigate proposed mergers and halt them if consumers protections are deemed inadequate.
The OFT will need to attempt to balance concerns of ensuring robust competition, and hence consumer protection, against financial stability in the marketplace. In 2001, the OFT blocked a Lloyd’s takeover of another UK banking institution, Abbey, due to the potential for an “adverse impact on consumer choice.”
The European Commission, charged with responsibilities including scrutinizing mergers of European institutions, is not likely to have jurisdiction over this deal due to the domestic nature of both Lloyds ad HBOS.
HBOS’s stocks have lost more than half their value in recent weeks.
The OFT is currently in the midst of an investigation into the British banking sector over bank charges.
About the author: Jason Hardy is an avid writer on legal issues, including international writing about many subjects including european antitrust lawsuits. Eu competition law interests Jason particularly. He resides in Seattle, Washington.
Labels: banking, banks, eu competition law, eu law, european antitrust lawsuits
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