Friday, 19 September 2008

Financial Disaster Hits Home

So the Bank of Scotland has gone, its been taken over by Lloyds TSB. I say its hit home as my mortgage is with them, presumably I now owe TSB/Lloyds/Halifax. If the institution had collapsed I may have gotten away without paying anyone, just to declare my personal financial interest. Greedy Banksters.

What happened to the competition commission, the once proud regulators of corporations? Well the banks had a chat with Gordo Brown who said it was a good idea, and that seems to be that. The idea used to be that they would stop a single institution getting too large a share of the market, to protect the smaller players. Tesco have for years been flouting this, lobbying so that some parts of their business are not counted. In the current climate of zero regulation they may as well just buy their competitors, a quick phone call to Brown seems to deal with all sorts of hurdles.

Gordon Brown intervened to broker a solution to HBOS and Downing Street made clear it was prepared to rip up Britain's competition laws to allow the takeover - a move that may cause the loss of tens of thousands of jobs and the closure of up to 500 branches.' The Guardian The last two remaining investment banks after the collapse of Lehman Brothers and the takeover of Merrill Lynch, Morgan Stanley and Goldman Sachs, were facing questions about their ability to withstand global turmoil. Shares in Goldman Sachs were down 19%. Morgan Stanley suffered a 24% decline, prompting a memo from its chief executive, John Mack, attacking "irresponsible" speculators for spreading fear and rumour. HBOS had insisted yesterday that it was not in trouble, but is seen by the markets as particularly vulnerable to the sharp fall in UK house prices. The bank has 22 million customers, accounts for 20% of the mortgage market and takes in one pound in every six saved in the UK. In the USA they've nationalised the country's two biggest lenders - Fannie Mae and Freddie Mac - refused to bail out Lehman Brothers, helped orchestrate the takeover of Merrill Lynch and provided an $85bn lifeline to AIG.

A merger of HBOS and Lloyds TSB will change the face of personal banking in Britain, creating a gorilla among pygmies and eventually altering the look of the high street. Well over half the households in Britain would have a relationship with the new superbank, which would become the biggest player in the personal savings and mortgage sectors. Times On Line HBOS employs 72,000 people while Lloyds has 70,000, in both cases almost entirely in Britain. In mergers of such similarly positioned organisations, as many as one third of the combined workforce could lose their jobs. When Royal Bank of Scotland took over National Westminster Bank in 2001, 6,800 jobs were eventually lost. There was much less overlap between branches in that case, though, because RBS operated predominantly in Scotland and NatWest in England and Wales. Lloyds operates one of the biggest networks in the country with 1,900 branches under the Lloyds and Cheltenham & Gloucester brands. HBOS has 1,100; in many cases on the same high street. The future of the HBOS headquarters in Edinbugh is particularly sensitive. When Halifax bought Bank of Scotland it was a condition of the deal that the centre of gravity moved from Yorkshire across the Border. A Lloyds/HBOS combination would have a 29 per cent market share of current accounts, according to Cazenove, half as much again as the current market leader RBS. With regard to savings it would be four times bigger than any other bank, while it would be treble the size of the next biggest provider in the mortgages sector, Banco Santander of Spain, which owns Abbey.

JD Wetherspoon are said to interested in taking over some of the high street sites, just what we need. In all this turmoil where are the calls for an increase in Credit Unions? My local one, Reading Credit Union (call 0118 958 5803), are looking to set up groups of volunteers to spread the good news and to help others join. I think I shall join them, the future seems to be a stark choice of supercorps with not much left for the smaller chaps.

Incidentally Scottish Widows Investment Partnership (SWIP) is also owned by Lloyds TSB following the £7 billion takeover of its Edinburgh-based Scottish Life assurance parent in 1999. Halifax is part of the group, since which it has been known as HBOS, (Halifax Bank of Scotland). So are they now SWHBOSLTSB? Thats some mouthful. There may be some good news, a silver lining in these dark times, those horrible adverts with the singing banker Howard may stop.

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