Lloyds TSB To Support HBOS With GBP10 Billion Loan

Fri, 14 Nov 2008

Lloyds TSB is to provide its takeover target HBOS with a £10 billion loan facility, according to reports by the Sunday Times.

The newspaper said the "covert agreement" highlights how closely the two banks are working together ahead of Lloyds’ agreed acquisition of HBOS and added the scale of financial support was surprising.

Efforts are being made by the former heads of Royal Bank of Scotland and Bank of Scotland (now part of HBOS) to block the UK government-brokered takeover as they believe HBOS is now able to survive as a stand-alone business following the government’s bailout of the banking sector.

The proposal from Peter Burt and George Mathewson was rejected last weekend by HBOS officials.

The UK’s biggest mortgage lender agreed to the offer by Lloyds, which will involve the government taking a stake in the merged entity, after its shares were deeply hit by the global financial markets turmoil and concerns over its exposure to the deteriorating UK housing market .

The Sunday Times also reported that British banks "made it quite clear" to Chancellor Alistair Darling that customers would not benefit from any further interest rate cuts after most agreed to pass on the Bank of England's 1.5 per cent cut last Friday.
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