Salmond seeks review of HBOS takeover

Published on Saturday 18 October 2008 22:15

ALEX Salmond has said that the planned takeover of HBOS by Lloyds TSB should be reviewed following the Government's dramatic bailout of the stricken bank last week.

The First Minister said the 37bn rescue package unveiled by the UK Treasury could allow HBOS to continue as an independent concern – if the cash was available to the bank on its own.

Chancellor Alistair Darling agreed last week to plough funds into HBOS after its planned merger with Lloyds TSB goes ahead. Salmond suggested that if the Government was prepared to offer the cash to HBOS on its own, it could still have a future.

But the fresh hopes for the bank are being quashed by many senior finance figures, as well as all the MPs in Edinburgh, who argue that the takeover is a necessity. Some believe that HBOS's asset base is so weak that it must be taken over or face complete nationalisation.

The First Minister has said until now that the takeover by Lloyds TSB is "the only game in town", and he has deflected calls to keep the Edinburgh-headquartered HBOS as an independent bank.

But Salmond said yesterday: "In the last few weeks the Lloyds TSB offer was the only game in town, but we are now in the situation where the Government has decided to recapitalise, and the central question is: is that recapitalisation available to HBOS itself? Or is it contingent on the merger taking place."

He hinted that if the Treasury agrees to offer funds then he would support the calls for it to remain independent. "Once we find out if the bank is secure through recapitalisation then I think we can make decisions," he said.

Two members of Salmond's council of economic advisers said they supported calls for a review of the merger last night.

Crawford Beveridge, the former chief executive of Scottish Enterprise, said: "I question the rush into the merger. I think we have cause to stop for a second to see if a merger makes sense given the monopoly we would get in the marketplace.

"I want to know why the Government is so silent on this and there is such a rush. It makes me suspicious that there are deeper political reasons. I think an independent review is the right thing to do. It just seems we are not taking time to ask that question."

Jim McColl, the chairman of Clyde Blowers, and another of Salmond's advisory panel, added: "Why should this merger go ahead now? The main reason at the time it was announced was because it was the only way to save it, but since then there has been a realisation that this is a much bigger issue than one or two banks."

McColl warned that a merged bank would "obviously" rationalise, and said that the damage to Scotland's economy – given its reliance on financial services – could be immense. But the takeover is being supported by all of Edinburgh's MPs who, along with Darling, include Labour's Nigel Griffiths, Mark Lazarowicz and Gavin Strang, and the Lib Dems' John Barrett.

Barrett said: "If HBOS could stand on its own, then that would be fine, but it seems that the bank was in such a bad way that standing on its own was no option."

Griffiths added: "Nobody has put forward any viable alternative to this. My view is that this should go through. It is a necessity."

Lazarowicz went on: "It does strike me that if this deal fell through then HBOS shares would go through the basement within five minutes. With HBOS it isn't just liquidity that is the problem, it is the quality of the asset base. And that weakness isn't going to go away."

Colleagues of Strang said that he too was behind the merger.

Treasury sources last night insisted that the deal was the only option, claiming that HBOS chiefs are "desperate" to ensure it goes ahead.