Tonight:
9°c
Pressure was mounting on Lloyds Banking Group chief executive Eric Daniels today, as regulators in Brussels consider forcing the part-nationalised bank to offload mortgage lender Halifax.
The European Commission has warned Lloyds, 43%-owned by the taxpayer, that it may have to get rid of Halifax in return for receiving billions of pounds of state aid.
Such a move would be a disaster for Daniels and could trigger his departure from the bank.
It would also be an embarrassment for Gordon Brown who helped stitch together the Lloyds rescue of stricken rival HBOS, the owner of Halifax and Bank of Scotland.
The deal, which gave the combined bank a third of the mortgage and current account markets in the UK, has already cost Lloyds chairman Sir Victor Blank his job. Sir Win Bischoff took over yesterday
Competition Commissioner Neelie Kroes has yet to make a final decision but it is understood this will include draconian penalties on Lloyds.
A source close to the negotiations said: "The Commission has not made a final decision but what they are talking about sounds a lot like Lloyds giving up Halifax."
The Commission is looking at the £17 billion Lloyds received from the Government when it rescued HBOS last year. It is also considering Lloyds' decision to insure £260 billion of toxic assets in the Government Asset Protection Scheme (APS).
If Brussels rules that state aid gives Lloyds an unfair advantage over its rivals, it can force the bank to sell assets.
Lloyds is now pondering whether to scale down its involvement in the APS and raise money in a rights issue instead to reduce its dependency on the state.
Analysts also point out that Lloyds was the first bank in Europe to pay back any state aid.
Lloyds hoped it could satisfy the Commission by selling Cheltenham & Gloucester and making disposals in Scotland, but Kroes is understood to have rejected such a deal.
Lloyds declined to comment but is known to be desperate to save Halifax, the "good bank" inherited from HBOS to Bank of Scotland's "bad bank".
Brussels forced German bank Commerzbank to shed 45% of its balance sheet in return for �18 billion (£16 billion) in state aid, and yesterday warned warned that the Dutch deal to bail out ING may have been too generous.
Reader views (5)
Haven't heard a word about this on broadcast news - has Brown slapped a "D Notice" on it?
- Ted, London
So does this mean that Barclay's will have to offload the Woolwich
- Jim Allan, Lake District
Think you're right Roy - remember Northern Rock as it hit the skids the most profitable part of its mortgage portfolio the equity release portfolio was shed and sold to JP Morgan, Tony Blair had just recently been made a director of the very same bank.....
- Wallytrader, London
Once again Captain Queeg of the sinking ship has fouled up big time on this one. This forced takeover has already cost thousands of jobs in the banking sector. The Labour supporting unions would be spitting blood if they were car workers.
Brown pushed Lloyds into the deal and now the chickens are coming home to roost.
- James, Braintree UK
Was it planned?
Sell Haliax (who will buy?) the good bit and be left with the rotten apple? If the original deal broke EU Competition Rules then it was for Gordon to know that (or be advised of it) before he brokered the deal. Surely if the "contract" was illegal then the only way forward is to rescind it and put everything back to Square1 before this disaster was allowed to happen. Lloyds will then be left to revert to the boring, safe, ethical, "old fashioned" bank it was before avarice, greed and short term, bonus related, mentality took over.
The Government (us) will be left to pick up the pieces of what they allowed to happen through de-regulation and a weak FSA.
- Roy, Billericay Essex
