Lloyds TSB last night agreed a £12bn rescue takeover of HBOS after the government brokered a deal to save the country’s largest mortgage lender from a crisis of confidence.
After three days of turmoil in the financial markets triggered fears for HBOS’s viability, the government signalled it was willing to waive competition rules to allow the merger that will create Britain’s biggest retail bank.
Gordon Brown and other ministers have been active in encouraging a market solution to save HBOS in an effort to avoid a repeat of the run on Northern Rock, the mortgage lender that was nationalised.
The Financial Services Authority contacted a number of other banks, including HSBC. However, Lloyds was the only lender willing to take on HBOS without a large government guarantee.
The extraordinary move is seen as necessary to shore up confidence in HBOS, the UK’s largest savings institution, after the rising cost of wholesale funding and a sharp share price fall raised concerns that the bank would not be able to fund itself.
Executives from Lloyds and HBOS finalised the deal last night. Details of the takeover are set to be announced today, though it is not expected to be closed until the end of the year.
Financial Times, The Times, Daily Telegraph, The Independent