FROM BLACK HORSE TO BLACK DAYS

When the global recession started and the banking crisis began, one bank was praised for doing everything right and looked strong as other banks such as Northern Rock had their worried savers queuing to get their money out before the bank went belly up, that bank was, of course, Lloyds TSB.

As other banks began to crumble Lloyds looked a strong bet, and with some encouragement from the Government, plus a nod and a wink from Peter Mandelson, the Trade Minister, Lloyds TSB merged with Halifax Bank of Scotland. We were all informed at the time that this was a good move and both banks would benefit. 

Sadly, this was not so and Sir Victor Blank, the Lloyds TSB chairman who promoted the idea of the take-over to Gordon Brown at a cocktail party, was forced to resign as the whole deal went pear shaped. As soon as it was announced he was to quit as the chairman shares in the bank began to climb, only to plunge again by around thirty per cent when Sir Victor revealed in a letter to shareholders that the European Commission could well demand the break up of the bank under its competition rules.

It would seem that Gordon Brown and the Government was so desperate to dump the problem of the Halifax Bank of Scotland and to avoid nationalising it, they virtually tore up the competition rule book to rush the deal through.

The merger of the two banks made the new merged bank one of the largest on the High Street controlling thirty percent of both the Mortgage and saving markets.

Sir Victor Blank wrote that the EC could move in and force the bank to shrink. How the EC deals with this matter is speculation at this point in time, some predict it could force the bank to sell off ‘non-core’ assets, which would not be too disastrous for the bank, however, the EC also has the power, due to successive British Governments surrendering their right to govern to the EU, to force the bank to sell off its ‘core-assets’ such as overseas operations.

There is speculation that the bank may have to sell off constituent parts of HBOS - its Halifax or Bank of Scotland divisions or its Scottish Widows insurance arm.

It would seem that the normal due diligence before any major take-over had not been fully completed. Because of the fiscal problems this has created for the bank the Government has been forced to prop up the bank with state aid which has set alarm bells ringing in Brussels which will not hesitate to interfere in British affairs. The Lloyds TSB sign has gone from a romping black horse to a sign of black days ahead under EU orders.