This is the beginning of the unwinding of Brown’s personal catastrophe. By putting together a generally sound bank with a total basket case he - and it was he personally - made sure not only that the new mega-bank would be hamstrung fromn the start but also that his construct would have so many tentacles all over the ‘high sztreet’ and the housing market that it would be a danger to the competitiveness of the rest of the banking system.
If he couldn’t see that the EU could ! This was the inevitable result and despite one’s hackles rising at the EU’s interference it is right that somebody should interfere. Letr us hope that the end result is the abandoinment of HBOS to its fate and the revival of something akin to the old Lloyds-TSB.
Christina
FINANCIAL TIMES 26.9.09
EU ruling threat to Lloyds’ branches
By George Parker and Jane Croft in London and Nikki Tait in Brussels
Lloyds, the part-nationalised high street banking group, faces the loss of large sections of its business and a sixth of its market share in Britain as part of a state aid ruling being drawn up by Brussels, the Financial Times has learnt.
Neelie Kroes, Europe’s competition chief, will insist that the enlarged Lloyds Banking Group, created by its rescue of HBOS at the height of the financial crisis, sell a substantial part of its retail and corporate operations because of the huge taxpayer subsidy it received.
Brussels officials have rejected reports that Lloyds would have to sell the mortgage bank Halifax to comply with the Commission’s ruling on state aid, which could come within weeks.
However, officials in London and Brussels say that Lloyds will have to go further than shed its Cheltenham & Gloucester subsidiary, which has 164 branches. “That is nowhere near enough – they would have to do something else,” said one.
Brussels and Treasury officials have raised the prospect of forced divestments, through the sale of businesses, branches or loan books, which would reduce the bank’s market share by about 5 percentage points.
Lloyds may have to close or sell a number of its 1,000 Halifax branches. A final decision has yet to be taken.
Lloyds, which is 43.5 per cent owned by the taxpayer, has a 31 per cent share of current accounts and 30 per cent of all UK mortgages. It has 22 per cent of lending to small businesses. The Treasury hopes the disposal of Lloyds assets will encourage new entrants into banking.
RBS, 70 per cent owned by the taxpayer, will be told to make disposals on a similar scale.
Between them, Lloyds and RBS have received more than £40bn in direct government assistance. Under EU state aid rules, beneficiaries of government bail-outs usually have to restructure their operations to compensate for the competitive advantage they have enjoyed.
Ms Kroes, who wants to reach a final decision on Lloyds and RBS before the official end of her five-year term on October 31, is growing impatient with the pace of the state aid talks.
The Treasury has agreed in principle to insure £260bn of Lloyds’ toxic assets. The bank is hoping to raise cash from investors to minimise its participation in that scheme. It has been warming up investors for a rights issue and could also raise £8bn by converting preference shares into equity. It could also sell its life assurance operations.
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