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Two senior bankers have launched a bid to keep the HBOS banking group independent, claiming that it would save more than 20,000 jobs and be better for Britain and shareholders than the planned takeover by Lloyds TSB.
Sir Peter Burt and Sir George Mathewson, former chief executives of the Bank of Scotland and Royal Bank of Scotland respectively, have written to HBOS calling for its chairman and chief executive to resign.
Burt said the plan would be to 'take HBOS back to what its core business should be', while recruiting a new management team to run the bank. The intervention is potentially embarrassing for the government, since it raises fresh questions over whether a merger that ministers supported - and Gordon Brown championed - offers good value for taxpayers and will needlessly see the loss of thousands of jobs. Even if the bid fails, it could still delay a process that ministers want resolved quickly in order to kick-start lending to businesses and homeowners.
Burt and Mathewson have already approached Treasury officials who have not ruled out their proposal, but it was tonight unanimously rejected by the HBOS board. The Treasury, however, suggested that, if HBOS shareholders voted down Lloyds TSB's original £12bn bid in favour of an alternative proposal, it would be a commercial decision which would be accommodated. But it warned that the boards of both Lloyds TSB and HBOS had backed the merger and that shareholders have also indicated their support.
Scotland's First Minister, Alex Salmond, who has repeatedly questioned the merger proposals, welcomed the intervention by two of Scotland's most senior financiers and added: 'The position of the Scottish government is very clear. We will respond to all propositions for the future of HBOS on exactly the same basis, which is: what they will mean for numbers of jobs, the extent of decision-making and competition for business and personal customers in the wider Scottish economy. That represents the Scottish interest, which is paramount in our consideration.'
The audacious approach is aimed at persuading HBOS's board to abandon the £12bn takeover by Lloyds TSB, which was agreed a month before the government unveiled its £400bn support package for Britain's banks. That package, the bankers believe, means that HBOS can now survive on its own.
'The terms of the takeover are unfair to HBOS shareholders and we believe there are better options available, which the board should explore. The failure to do so is to sacrifice the opportunity for shareholders to recover substantial lost value,' the bankers write in the letter.
Burt added: '[The deal] is not in the public interest because it is anti-competitive, as the Office of Fair Trading has said, and will cost thousands of job losses. ' Lloyds TSB has refused to comment on the number of jobs which will be lost in the takeover but it has promised to save £1.5bn, or around 16 per cent of the combined cost base.
That would imply that more than 22,000 of the combined 142,000 workforce could go. Jim Spowart, the Scottish financier who is trying to broker a rival bid from a Spanish bank - details of which could be announced this week - says that as many as 100,000 Scottish jobs could be threatened through the knock-on effect on other professional services.
Sources close to HBOS have questioned whether Burt and Mathewson have the credentials to lead the bank. Lloyds TSB said it remains 'absolutely committed' to continuing with the merger deal, which they say has overwhelming shareholder support.
The Liberal Democrat treasury spokesman, Vince Cable, said: 'The government must explain clearly why it believes the merger should go ahead in the changed circumstances, and have an open mind towards credible new bids.'
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