Bill Jamieson: An unsustainable solution - then and now

Published on Friday 1 April 2011 19:02

Two years ago, The Scotsman vigorously campaigned against the Lloyds Bank-HBOS "merger" - precisely on the grounds of substantial loss of competition in the fields of retail branch banking and small business lending.

We warned that Peter Mandelson was wrong to waive the very rules over which he was supposedly in charge. We supported to the hilt the legal challenge brought by the Lloyds Action Group that sought to have the waiver overturned.

Now the Treasury select committee is the latest to speak out on the dangers of a banking Leviathan that this shotgun wedding brought into being. It warns that the merged group's share of the retail banking market - almost double that of its nearest rival - could be damaging competition in the UK. And it says the European Union-imposed sale of 600 Lloyds branches may not be enough to address competition concerns.

Shrewdly, it has also called for a public interest test to apply to divestment and future sell-offs. There can be no denying the seriousness of the crisis faced in October 2008, when HBOS, with 25 million customer accounts, tottered on the precipice of a spectacular failure. A collapse would have brought down the banking system, the government - and much else.

But the rescue should have been undertaken with regard to existing competition law and branches divested at the time.

It was an unsustainable solution then - and it has proved unsustainable now. The imminent publication of the Independent Banking Commission report will further support the analysis we set out and campaigned on at the time.