Lloyds TSB/HBOS merger in danger of dissolution, sources say

Industry insiders recently reported that the controversial merger of Lloyds TSB with HBOS may be on the fast track to getting scrapped thanks to a new government investigation.

Exploring whether Lloyd’s takeover has damaged competition in the financial market, the investigation is taking a hard look at the events since the merger, which took place at the peak of the banking crisis; the giant corporation formed by the merger has been criticised heavily since the redundancies created by the takeover resulted in job loss numbers in the thousands.  In addition, the takeover left the Lloyds Banking Group 43 per cent nationalised.

Business Secretary for the coalition government, Vince Cable, recently stated that the merger could be subject to legislative unraveling.  This statement resonates strongly with the government’s new commission, the the Independent Commission on Banking, and its newly-launched investigation in regards to the possibility of breaking up the UK’s biggest banks to reduce risk of another banking crisis.  In addition to other large banks such as HSBC, Lloyds is being considered for the chopping block.

Meanwhile, investors who originally voted in favor of the takeover have been expressing anger over being duped.

One such group of investors, comprised of approximately 500 shareholders, is Lloyds Action Now.  The organisation has been issuing demands for reimbursement and compensation on behalf of several test claimants to the former Lloyds chairmain Sir Victor Blank, the bank’s chief executive Eric Daniels, and the Treasury.

Lloyds Action Now’s chief claim is that they had been misled into agreeing to the takeover whilst being kept in the dark in regards to HBOS’ £25.4bn in outstanding debt to the Bank of England.

The BoE had loaned the funds to HBOS in 2008 October, soon after the catastrophic failur of US investment banking entity Lehman Brothers.

While HBOS’ loans to the BoE have been repaid in full, at the time the takeover was discussed, there is no evidence of the debt being disclosed in any related documents.

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