So that's a regulatory requirement then.
I can remember back in the day (2001), when the UK had similar concerns over LloydsTSB's expansive acquisition plans as it strove to become a European size banking giant with the acquisition of Abbey National as it was then called.
I also recall that the proposed acquisition was blocked by the UK's Monopolies and Mergers Commission as it would have given the enlarged group a 27% share of UK Current Accounts (Lloyds TSB/Abbey tie-up blocked), with 25% being seen as the water shed.
Roll the clock forward to 2008 and Caveat Emptor, Trojan Horses, hospital passes, greed and any number of similar terms come to mind as Lloyd's walked straight into what appeared to be Gordon Brown's and Mervyn King's desperate attempts to sell them a "cut and shut" used car in the form of HBOS.
No mention was made at the time that the BoE had been making secret loans to prop up the bank and Gordon Brown seemed to imply that any anti-competition fears would be steam rollered on the basis of National Interest!
Then Lloyds, under CEO, Eric Daniels and Chairman, Victor Blank (I know, if it was fiction you'd think the name too obvious), failed to follow due diligence in their greed driven stampede to take over HBOS and ended up with...wait for it...an estimated 30% market share of UK Current Accounts.
Then, after having apparently been duped into paying £12bn for this dodgy used bank with no warranty and no get out clause, Lloyds itself went back to the same used car salesmen for a £21bn loan!
Then Lloyds, under CEO, Eric Daniels and Chairman, Victor Blank (I know, if it was fiction you'd think the name too obvious), failed to follow due diligence in their greed driven stampede to take over HBOS and ended up with...wait for it...an estimated 30% market share of UK Current Accounts.
Then, after having apparently been duped into paying £12bn for this dodgy used bank with no warranty and no get out clause, Lloyds itself went back to the same used car salesmen for a £21bn loan!
Even more laughable (you really couldn't write it as no-one would believe it), the enlarged organisation was then informed by the EU Monopolies Commission that the combination of increased market share AND the £21bn bailout gave Lloyds too much of a competitive advantage so they would have to sell 632 branches/4.8m customers (3.1m Current Accounts), which would bring its share of UK Current Accounts back down to 25%!
On the face of it, it even looks like they, and tax payers have lost out on that deal as well with just £800m being raised (£400m of which is dependent upon performance up 2027), as opposed to the £1.5bn equity capital valuation.
Just what was the point!
For me at least, it appears that Brown and King failed to undertake their accountable responsibilities on the grandest scale.
For National Interest read self interest.
HBOS should have taken the bailout directly, so maintaining a big five whilst ring fencing some of the worst contagion risk.
On the face of it, it even looks like they, and tax payers have lost out on that deal as well with just £800m being raised (£400m of which is dependent upon performance up 2027), as opposed to the £1.5bn equity capital valuation.
Just what was the point!
For me at least, it appears that Brown and King failed to undertake their accountable responsibilities on the grandest scale.
For National Interest read self interest.
HBOS should have taken the bailout directly, so maintaining a big five whilst ring fencing some of the worst contagion risk.
As it is they allowed a further well to be poisoned.
Further like any pseudo-takeover in the real world, seats on the board should have been taken to ensure that shareholders interests (i.e taxpayers), were suitably considered in what was and continues to be the Banking industry's flawed decision making and pyramid remuneration schemes.
To be fair it has been stated that Lloyds would have required some form of bailout without HBOS but given that the bailout totalled £21bn and Lloyds paid £12bn to take on HBOS's toxic assets, I personally find that difficult to believe on anything more than a minimal scale.
Further like any pseudo-takeover in the real world, seats on the board should have been taken to ensure that shareholders interests (i.e taxpayers), were suitably considered in what was and continues to be the Banking industry's flawed decision making and pyramid remuneration schemes.
To be fair it has been stated that Lloyds would have required some form of bailout without HBOS but given that the bailout totalled £21bn and Lloyds paid £12bn to take on HBOS's toxic assets, I personally find that difficult to believe on anything more than a minimal scale.
For example £21bn of bailout less £12bn paid equals £9bn.
But if the bailout was even remotely related to the level of bad debt in the combined group it could be argued that 50% of the £21bn might have been Lloyds and 50% HBOS (and I have read nothing to suggest that the majority of the "toxic" debt wasn't HBOS's).
So without the purchase of HBOS lets say the sum "could" be £10.5bn of bad debt existing on the Lloyds book's but then (without HBOS), Lloyds would still be able to raise/call on £12bn that it wouldn't have paid out to HBOS shareholders.
Taking the scenario further if Lloyds could have covered its own share of the bad debt of £10.5bn (50% of £21bn), then the taxpayer would only have had to support HBOS for the other half, £10.5bn.
Any change to the 50/50 assumption would obviously increase/decrease one side or the other.
The missing bit would have been absorbed by the HBOS share price which had collapsed but in turn this would have found a new level given that a bailout (from any source), would have re-established the bank as a going concern and reduced uncertainty about its future.
So it could be suggested that Mervyn and Gordon have probably wasted £10.5bn of taxpayers monies that they could have avoided if they had been decisive rather than secretive and underhanded as history suggests!
For shareholders in Lloyds, a retail bank relatively unexposed to the "instruments of wealth destruction" of the credit crunch before HBOS (if not the liquidity issues in the aftermath), it has been a nightmarish destruction of value and betrayal by Blank, Daniels, King, and Brown (and extended sycophants/advisors).
Its really galling that there seems so little consequence in the world to those involved who continue to be well rewarded despite their obvious, and very public, failings, and their betrayal of those they were/are in place to protect.
Really galling!
Related article links:
- http://news.bbc.co.uk: Lloyds TSB/Abbey tie-up blocked
- http://news.bbc.co.uk: Lloyds TSBHBOS deal
- http://www.lloydsbankinggroup.com: Moodys_LBG_15Jun11.pdf
- http://www.sharecast.com: Lloyds and Co-op agree on a price for Verde branches
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