HBOS takeover: Still time to save 'The Bank'

THE Scotsman is today demanding answers about the HBOS takeover in a bid to secure the best deal for the nation and prevent the untimely and unnecessary death of one of our most venerable institutions.

The newspaper is adamant that Scotland should not hurtle towards the Lloyds buy-up without scrutinising it meticulously and ensuring it remains necessary in the rapidly changing financial climate.

There is a need for assurances that it is in the best interests of shareholders, customers, employees and the Scottish economy. And The Scotsman believes that the option of maintaining HBOS as an independent bank should not be hastily swept from the table.

The cause is being backed by leading businessman Jim Spowart, who is battling to clarify the terms of the deal. He is calling on the government to rethink its support and to keep the bank independent. And last night, a spokesman for Alex Salmond, the First Minister, said "questions will be asked" and reiterated his hope that HBOS, known colloquially in Scotland as "The Bank", should remain independent.

The takeover, mooted earlier this month, was presented as a done deal on Monday when the UK government said it would take a 17 per cent share in the resultant "superbank".

Westminster has already lifted the usual competition laws to allow the deal to go through. But The Scotsman is concerned that the deal is now seen as having to succeed at any price – particularly as the terms were renegotiated downwards on the day of the bank bail-out announcement.

When the deal was first hammered out, sources said the alternative was for HBOS to go under, but the unprecedented bail-out, announced on Monday, means the absolutes are no more.

Mike Gilson, the editor of The Scotsman, said: "It is right and proper that this newspaper should ask serious questions about the takeover of HBOS by Lloyds TSB. We are extremely concerned about what might be perceived as a drift towards takeover without a pause for some serious questions to be answered."

As Lloyds TSB's share price fell further yesterday, dragging the effective takeover price of HBOS down to 91.5p per share, Mr Spowart was in touch with Lesley Sawers, the head of the Scottish Council for Development and Industry (SCDI), to build a broad front of business support for a thorough rethink of the takeover.

Mr Spowart told The Scotsman last night: "HBOS is certainly manageable on its own – and, indeed, it would be better if it was kept independent and allowed to trade out over the next three years.

"The Lloyds TSB takeover will mean a cull of thousands of jobs, with figures I've heard mentioned of cost savings of up to 3 billion."

A spokesman for the SCDI said it was "willing to engage to get the best possible outcome for Scotland".

He went on: "If the bank rescue package had been announced a few weeks earlier, then this takeover would have been unlikely to go ahead.

"There are a lot of Scottish business people who have had positive help from the Bank of Scotland over the years and, without that local support through tough times, they may not have survived."

Among the senior business figures demanding a rethink is Donald Macdonald of the Macdonald Hotels chain.

He told The Scotsman last night: "There are Scottish businesses which would not be here today had the management of the Bank of Scotland not had an understanding of local problems and local conditions."

On the stock market yesterday, shares generally continued to rally, with the FTSE 100 up 137.3 points, or 3.2 per cent, at 4394.21. But shares in Lloyds TSB fell 10.7p, or 6.6 per cent, to 151.3p, while HBOS fell 4.7p, or 5.2 per cent, to 85.3p. By contrast, Barclays rose 14 per cent to 246p.

Analysts fear the government's rescue bid may have created a two-tier banking system, with HSBC and Barclays in the premier league, and Royal Bank of Scotland, Lloyds TSB and HBOS in the second division.

Mr Gilson said that while it might have been "the only show in town" a couple of weeks ago, the part-nationalisation of RBS meant "the sands are shifting rapidly on this financial story".

He said: "Certainly, we believe it questionable that the current HBOS management team is best placed to fight for the best interests of the Scottish side of the business, given that they are serving a very public and humiliating notice period.

"There are serious questions about the severe lack of choice in the high street for personal and business customers in Scotland if the deal goes ahead.

"We are also unashamed in calling for every effort to be made to preserve the historic function of the Bank of Scotland, headquartered in Edinburgh with an expert staff backed by centuries of tradition in service to both Scottish commerce and the wider community."

He said that while "nobody has the ideal solution", the country "should not sleepwalk into this takeover".

He added: "In the next few days and weeks, we will be putting tough questions to both banks and the government on this deal."

A spokesman for Mr Salmond said: "The First Minister's preference was always that HBOS should remain as an independent bank. Of course, questions will be asked during this period before the decision is ultimately taken by the shareholders."

There were unconfirmed reports yesterday that the Treasury was working on a plan for the outright nationalisation of HBOS were the takeover to fall apart.

But Mr Spowart said: "Total, outright nationalisation would just not fly. Shareholders would legally challenge it. There would be a legal challenge to the government. It is more likely that the government would take a 70 per cent stake until normal conditions resume."

Roger Lawson, from the UK Shareholders Association, said he also believed that the deal should be completely reassessed. He is a shareholder in Lloyds TSB and he questioned the deal at a presentation by the bank yesterday.

He said: "At the start, the deal seemed to make sense, but the new deal means giving away an arm and a leg and independence. There is a lot of concern among Lloyds TSB shareholders.

"A couple of weeks ago, most were generally in favour of the deal, but with the fundraising and the cancellation of dividends for five years, most private shareholders think the whole thing is bonkers."

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Independence: would it have lessened crisis?

After Gordon Brown's claim that the case for independence has been severely damaged by the global crisis, The Scotsman asks what difference a self-governed Scotland would have made

Would an independent Scotland have been able to bail out RBS and HBOS?

Unionist politicians have claimed an independent Scotland could not have afforded the 37 billion the UK Treasury has found for the banks. That is more than the annual Scottish block grant and would have left Scotland with a huge debt – far greater in percentage terms than the debt the deal will be worth in UK terms.

But the UK government does not have the money either and will borrow it from the world money markets in the form of a gilt auction. An independent Scotland could, arguably, have done the same.

Would RBS and HBOS have got into such trouble had Scotland been independent?

The Nationalists have argued that Scotland would have better financial regulation to prevent banks from being so cavalier with money and mortgages.

Politics professor John Curtice has also suggested that an independent Scotland might have prevented the Bank of Scotland from being merged with the Halifax.

Would an independent Scotland have been able to cope with the banking crisis in general?

Alex Salmond was adamant last week that an independent Scotland would have acted as decisively as the Irish government, which moved to guarantee all deposits in its banks while other European countries, including the UK, were deciding how far to go.

That restored confidence in the Irish banks and an independent Scotland would have had that same flexibility. What it would not have had was the economic clout that comes from being part of the world's fourth-biggest economy. This week Gordon Brown persuaded other European countries to follow the British lead, something no leader of a small independent country could have done.

Is there an "arc of prosperity" any longer or is it the "arc of insolvency"?

The "arc of prosperity" was supposed to include Norway, Iceland and Ireland.

Iceland has suffered the most dramatic fall. Norway is in a better position and is expecting its economy to grow by a reduced amount for the next couple of years. Ireland is already in recession but, as Irish economic expert Marc Coleman has pointed out, it was coming from such a position of strength it is well ahead of the UK in economic terms, even though it has sunk into a recession.

"After 15 years of record-busting growth, some froth is being blown off the Guinness. But the glass remains very much almost full," he said.

The "arc of prosperity" no longer exists, but neither is it the "arc of insolvency" of Labour claims.

Had an independent Scotland been in the eurozone, would it have made a difference?

The SNP has always predicted that an independent Scotland would be in the eurozone. The euro has sunk against sterling, which is not good news for Irish importers or the all-round Irish economy.

However, being in the eurozone has cushioned the Irish economy from the worst effects of the credit crunch. Iceland has seen its currency plummet because it does not have the resilience that comes with having 400 million users across a continent.

Will the looming recession persuade Alex Salmond to put off the 2010 independence referendum?

There is an argument to suggest the Scottish Government would not be able to bring forward a referendum on independence in the midst of a recession, simply because it would not seem right.

But the First Minister is determined to bring forward the referendum bill because it is his party's flagship piece of legislation. It may not get through the parliament, but there is little doubt Mr Salmond is absolutely committed to it.