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The decision by
Yesterday evening, the British government helped engineer a deal which saw LloydsTSB rescue the country’s third largest mortgage lender Halifax Bank of
Although the government may turn a blind eye to competition concerns the OFT could uncover and thereby allow the creation of the country’s largest retail bank with 28 percent of the mortgage market, it was nevertheless a decision born out of sense and prudence, and one not made lightly, given past competition concerns voiced when Lloyds pursued Abbey National in 2001.
That deal foundered since the
Under section 42 of the
“Currently public interest grounds cover only plurality of media ownership and national security,” stated the OFT today and some have suggested that additional legislation would be needed to create an additional public interest.
Nevertheless, the OFT will still undertake its usual review of the acquisition and when that analysis reaches the Secretary of State, the decision may then be taken to overrule the antitrust regulator in the 'public interest'.
There seems little doubt that the steps the
But as the market settles down – whenever that may be – some questions will have to be answered. Firstly, the issue of other bidders.
The manner in which the deal was engineered by the government has riled some, since it is said to have by-passed the normal bidding process. HSBC is understood to have been sounded out for interest in acquiring HBOS but the terms were not judged suitable. Other banks – potentially from outside the
While yesterday's solution appeared to contrast the Northern Rock bail-out, it was in fact not as ‘private sector-led’ as it appeared and the involvement of government and regulators was essential. This may lead rival banks – particular those missing out of the bidding process – to complain to competition authorities in
Once the dust has settled and the credit crisis has died down, the
Excluded from applying its usual regulatory powers in advance of the merger, the OFT may need to address competition concerns after the deal has gone through.
In recent years the
While some argue that the UK's banking market has changed significantly in recent years – particularly since Lloyds' 2001 pursuit of Abbey National – tying the hands of a regulator such as the OFT, which has been firm on antitrust concerns in the banking sector in the past, may bring heavier-handed intervention at a later date when abuses arise.
By Lewis Crofts and Robert McLeod