24 October 2008

MLex: UK Parliament paves way for Lloyds TSB-HBOS deal

The UK Parliament has passed a new law allowing the government to step in and approve mergers that might otherwise pose competition concerns, in the interest of financial stability.

The UK Parliament has passed a new law allowing the government to step in and approve mergers that might otherwise pose competition concerns, in a bid to ease consolidation in the struggling financial sector.

 

In a final vote yesterday, a House of Commons committee adopted amendments to the UK's Enterprise Act, extending the government's right to intervene in order to ensure the "stability of the UK financial system."

 

The need for the new rules was spurred by Lloyds TSB’s rescue of rival UK bank HBOS, prompting an Order to secure the extension to be put before parliament on 7 October, under the 'affirmative procedure'.

 

This procedure requires that any Statutory Instrument amending an Act of Parliament be approved by both the House of Commons and House of Lords.

 

Lords approval came on 16 October, with a Commons committee debate, in the ‘Second Delegated Legislation Committee’, taking place on 20 October. 

 

Final approval came yesterday, 22 October, meaning that the Statutory Instrument has now passed into law and will be inserted as an amendment into Section 58 of the Enterprise Act. 

 

If cleared by the Secretary of State a combined Lloyds TSB, HBOS will reportedly hold a market share of roughly 28 percent in 'UK mortgages'.

 

UK consumer organization Which? recently expressed its concerns that the deal could have a long-term detrimental effect “for consumers, resulting in less competition in the current account, mortgage, savings and personal loans markets”. 

 

But despite the public interest extension allowing potentially problematic deals to be passed, the UK’s Office of Fair Trading must still conduct its usual competition review of the Lloyds TSB, HBOS tie-up and supply its findings to the Secretary of State. The OFT will also produce its own report on the public interest considerations relating to financial stability.

 

An intervention notice informing the OFT of the Secretary of State’s intention to intervene in the proposed merger was issued on 18 September.

 

The OFT subsequently put out an invitation to comment upon the public interest considerations specified in the intervention notice. 

 

The deadline for receiving comments is today, with the OFT due to report to the Secretary of State tomorrow, 24 October.

 

By Dafydd Nelson

 

© MLex