That’s what The Economist declared in a leader column on Friday.
Reason? The deal was forged in a moment of panic and, on sober reflection, it is simply anti-competitive:
The government may think that Lloyds’s managers, who have taken seven of the top nine jobs so far, would make better use of HBOS’s assets than an independent management would. It may also reckon that a bigger bank would be more likely to redeem the government’s preference shares quickly and turn a tidy profit for the taxpayer when the ordinary shares are sold: Lloyds plans to strip out £1.5 billion from costs (by, presumably, closing branches and laying off workers). But a new banking behemoth would also reduce competition significantly…
It is a shame that the bid was not referred, as the OFT urged, to the Competition Commission for more study. Lord Mandelson’s instruction to the OFT to keep the banking sector “under review” is no comfort: it has done so for years, yet banks nonetheless fail to serve consumers well in some ways. The point of controlling mergers at the outset is that, once consummated, they cannot easily be undone, nor behaviour changed…
When this crisis is over, the financial system will work better if a healthy number of competitors are still standing. A stand-alone HBOS preserved in the near term could find its own feet then, or be sold to a bidder with which there is less overlap. When goals conflict, competition is the surest lodestar.
Related link:
Reshaping the landscape – The Economist