Fears of a whitewash after 'fair trading' report on HBOS deal takes only hours to complete, before being given to Lord Mandelson

Published on Friday 24 October 2008 22:26

CONCERNS have been raised about the Office of Fair Trading's examination of the proposed takeover of HBOS.

The OFT handed its report into the takeover by Lloyds TSB to Lord Mandelson, the Business Secretary, yesterday, just hours after the submissions deadline closed on Thursday.

This speed has led financial experts and politicians to question the thoroughness of the OFT's report.

But the watchdog said it "worked round the clock" to look at concerns over the takeover, which threatens to leave Scotland's banking customers with a highly uncompetitive market.

Jim Spowart, founder of Intelligent Finance, said the time in which the report was turned around was surprising.

"Normally, a report like that would take a month after submissions are made to be completed. I certainly hope it is not a whitewash but the way this whole thing has been handled to date, I would believe anything," he said.

He also echoed calls by politicians for the findings to be made public immediately, to allow all shareholders the chance to study its conclusions before voting on the merger.

The Scotsman's own submission – which warned that Scotland's savers could be left with high charges and poor levels of competition – was sent to the OFT on Tuesday and could not have been received until Wednesday at the earliest.

Alistair Carmichael, the Liberal Democrats' Scotland spokesman, said that the OFT's report was produced with "uncharacteristic speed".

"It will raise suspicions in some minds that it was a formality or made to order for Peter Mandelson's department," he added.

Stewart Hosie, the SNP's Treasury spokesman, said he was astonished at how quickly the report had been compiled. He said: "I will want to make sure every submission has been fully studied when we look at the detail of the report."

A spokeswoman for the OFT said that staff had worked "round the clock" to turn the report around and insisted that all submissions had been taken into account.

But she added: "We won't be publishing anything until Lord Mandelson makes his decision."

Demands for the report to be opened to scrutiny came as the timetable for the proposed merger was revealed.

Lloyds TSB said it would post voting forms to its shareholders in the first week of November, a move which is expected to be co-ordinated with HBOS shareholders.

The general meeting to approve the "acquisition" is expected to take place two weeks later. In a statement, the bank said: "Lloyds TSB currently expects that the acquisition and capital raising will be completed in January 2009."

But SNP MSP Alex Neil said: "This report has to be published now, before the shareholders vote. If this report was only published after the shareholders' vote, that would be a ridiculous position."

It is understood that Lord Mandelson will publish details of the report before the shareholders' meeting.

A spokeswoman for Lord Mandelson's department said that he "hopes to announce it shortly after having received the OFT advice. He wants to do it shortly on the grounds of giving the market clarity over the decision".

Revolt against the proposed takeover of HBOS was continuing to grow among Lloyds TSB's small shareholders, said Roger Lawson, director of the UK Shareholders Association.

Investors were becoming increasingly concerned that the HBOS mortgage book – the bank has 18 per cent of the UK mortgage market – was looking riskier as property prices continued to fall.

Mr Lawson said many people had bought shares in Lloyds TSB because it was a relatively low-risk bank that had delivered a steady stream of dividends.

He said: "I was contacted today by an 82-year-old woman with an 86-year-old husband who is disabled. They rely for a lot of their income on Lloyds TSB shares. What are they going to live on?"

One Lloyds TSB shareholder who contacted The Scotsman yesterday, John Machin from Bedfordshire, said: "A link-up with HBOS and the government changes the risk profile of the company along the lines of the heat difference from moving from the North Pole to the centre of an active volcano."

Mr Machin said the merged bank would want to cut costs and increase its profitability, but the government, as a big shareholder, would want to minimise unemployment. "There is a clear conflict of interest," he said.