UK’s Business Secretary Approves Huge Bank Merger
The UK’s secretary of state for business, Peter Mandelson, granted approval on October 31 to the proposed merger of Lloyds TSB Group and Halifax Bank of Scotland (HBOS), two major British banks.
On September 18, Lloyds announced it was preparing to take over HBOS, Britain’s largest mortgage lender, for £ 12 billion. The HBOS share price had been steadily decreasing for almost a year. HBOS overextended itself with a heavy focus on sales and raising funds to lend to customers. When lending between banks slowed recently, HBOS faced a huge problem.
The merger will create a banking giant that will control about 25 percent of British accounts, 28 percent of home loans and £ 400 billion in savings deposits, or about 50 percent of the savings market. Normally this merger would raise competition issues. However, the government changed the law to allow the merger to take place in the interest of maintaining the stability of the British financial system. The takeover will create the largest ever British bank.
The OFT released its report to Mandelson on October 24, outlining its concerns with the merger. The OFT was particularly concerned that the merger would result in a substantial lessening of competition for mortgages, personal accounts, and banking services for small and medium sized businesses.
The OFT took into consideration the views of the Financial Services Authority, the Bank of England, and the Treasury, as well as other stakeholders. The OFT noted that most parties agreed that the merger would support financial stability, and was therefore in the public’s best interest.
The OFT’s report on competition issues was binding. Therefore, any anti-competitive outcome identified by the OFT is treated as being adverse to the public interest, unless it is justified by one or more relevant public interest considerations. The UK’s secretary of state for business found that the stability of the UK financial system outweighed the OFT’s competition concerns, and decided not to refer the case to the Competition Commission. He asked the OFT to “continue to keep the relevant markets under review in order to protect the interests of UK consumers and the British economy.”
The shareholders will vote on the merger in the third week of November. If the merger is approved, Lloyds expects to complete the transaction and capital raising by January. The government is injecting £ 17 billion in capital into the banks, which is contingent on the transaction going forward.
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.
On September 18, Lloyds announced it was preparing to take over HBOS, Britain’s largest mortgage lender, for £ 12 billion. The HBOS share price had been steadily decreasing for almost a year. HBOS overextended itself with a heavy focus on sales and raising funds to lend to customers. When lending between banks slowed recently, HBOS faced a huge problem.
The merger will create a banking giant that will control about 25 percent of British accounts, 28 percent of home loans and £ 400 billion in savings deposits, or about 50 percent of the savings market. Normally this merger would raise competition issues. However, the government changed the law to allow the merger to take place in the interest of maintaining the stability of the British financial system. The takeover will create the largest ever British bank.
The OFT released its report to Mandelson on October 24, outlining its concerns with the merger. The OFT was particularly concerned that the merger would result in a substantial lessening of competition for mortgages, personal accounts, and banking services for small and medium sized businesses.
The OFT took into consideration the views of the Financial Services Authority, the Bank of England, and the Treasury, as well as other stakeholders. The OFT noted that most parties agreed that the merger would support financial stability, and was therefore in the public’s best interest.
The OFT’s report on competition issues was binding. Therefore, any anti-competitive outcome identified by the OFT is treated as being adverse to the public interest, unless it is justified by one or more relevant public interest considerations. The UK’s secretary of state for business found that the stability of the UK financial system outweighed the OFT’s competition concerns, and decided not to refer the case to the Competition Commission. He asked the OFT to “continue to keep the relevant markets under review in order to protect the interests of UK consumers and the British economy.”
The shareholders will vote on the merger in the third week of November. If the merger is approved, Lloyds expects to complete the transaction and capital raising by January. The government is injecting £ 17 billion in capital into the banks, which is contingent on the transaction going forward.
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: British bank merger, eu competition law, eu law, european antitrust
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