The Government is moving sharply to derail a proposal by two senior Scottish bankers to break up the takeover of mortgage giant HBOS by Lloyds TSB.

Sir Peter Burt and Sir George Mathewson believe the deal is bad for shareholders, and insist Halifax owner HBOS can have an independent future.

But Chancellor Alistair Darling today listed strict terms for the Government's bank recapitalisation scheme, some of which seemed aimed at the Scottish knights. If Burt and Mathewson were to succeed in taking the helm of HBOS after a shareholder revolt, the bank would still need a massive cash injection.

Today's eight-point outline from the Treasury makes it clear they might not get funds on terms that would make a rescue viable. The Treasury says it would only allow access to public money to institutions that have "a sustainable business model and delivery plan" and "credible" senior management.

This appears to be a swipe at Sir Peter and Sir George, both of whose reputations have been tarnished by events at the banks they used to run.

Burt, formerly of Bank of Scotland, and Mathewson, ex-Royal Bank of Scotland, faced immediate opposition to their scheme, unveiled two weeks ago. Prime Minister Gordon Brown said last week the Lloyds deal was the only "serious" and "realistic" option.

Derek Simpson of the Unite union said: "They have failed to come up with any concrete proposals or money, and it is irresponsible of them to threaten the proposed merger."

The Government waived normal competition rules to allow the HBOS deal with Lloyds to proceed. In return for a £17 billion bailout of both banks, the state could end up with a 43% stake in the combined business.

A spokesman for HBOS said: "We welcome today's very clear statement by the Treasury. We note that there is no automatic access to the recapitalisation scheme, and that a clear and sustainable business plan is required. Such a plan is at the heart of our deal with Lloyds TSB."

The Burt/Mathewson consortium did not return calls.