HBoS becomes part of Lloyds

It's happened. It has today been confirmed that HBoS which includes Halifax and Bank of Scotland is to be taken over by Lloyds. It’s hard to view this as good news except for the fact that a 'run' on the Halifax would have been disastrous and word has it that customers were starting to withdraw their money.

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In my article yesterday I talked about the importance of the Halifax (see ‘Lloyds & Halifax to merge?’) so I won’t repeat those views here. As an Englishman, brought up and working in Wales with Scottish ancestry (the name’s a bit of a give-away), I am proud to describe myself as British.  For that reason I can’t say I’ve ever particularly warmed to Alex Salmond the leader of the Scottish Nationalist Party, however last night I found myself nodding in agreement when he attacked the City investors that have trashed the share price of HBoS. No doubt job losses will follow and in due course this will mean less choice for consumers. There’s no doubt that over the years Halifax has rattled out many more ‘market leading’ products than Lloyds and we’ll have to wait and see what impact the take-over has on the products and services offered. HBoS is no Northern Rock – essentially it was a sound business so once again I find myself scratching my head to really understand why it has been 'forced' to go cap in hand to Lloyds to be saved.

The US Government has, of late, been winning plaudits for all the steps it is taking to prevent a banking crisis. It has saved Fannie Mae and Freddie Mac – the businesses that underpin the US mortgage market – seen the orderly takeover of Bear Stearns & Merrill Lynch; bailed out the World’s biggest insurance company, AIG and deliberately not bailed out Lehman Brothers. Another action they have taken is to stop short investing on banks. Pretty 'hands-on, roll your sleeves up' type stuff. Action this side of the pond has been somewhat lighter and apparently our Chancellor of the Exchequer apparently asked investors not to target HBoS! That must have been the absolute ‘green light’ for investors to pile-in and give ‘em a good kicking.

You’d reckon by now that politicians would have twigged that ‘a vote of confidence’ has the opposite effect to that intended. Talk about Goldfish and bowl!

Sadly the truth is that no bank – no matter how well run – could service all its depositors if they all wanted to take their money out at the same time. This is why the media need to be careful when reporting this whole credit crunch business. As soon as they start naming banks there becomes a severe risk that investors will get jumpy and want to withdraw their money. Once the exodus starts it is virtually impossible to stop.  The night before last I was pretty frustrated watching Robert Peston the Business Editor on BBC news (surely the journalistic equivalent of Inspector Clouseau) merrily clomping around in his size 9’s talking away about the problems faced by HBoS. How many Halifax investors were watching that thinking I need to get my money out pronto? Don’t get me wrong, I am not blaming the media but I think at times more caution could have been applied. Sadly today I am reading the press and seeing another bank being speculated about. This is depressing. When will it end?

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