Lloyds TSB shareholders are due to decide the fate of HBOS later today as they vote at the bank's extraordinary general meeting over the approval of its acquisition and the formation of Lloyds Banking Group.
The outcome is expected to be positive for HBOS
, as a rejection could spell disaster for the UK banking system. Chancellor Alistair Darling warned in a statement yesterday that access to the Government's £37billion bank bail out is not 'automatic', suggesting that it should not be assumed that both HBOS and Lloyds TSB
participation in the scheme is not certain.
The Lloyds TSB acquisition of HBOS has been in the pipeline since late September when the banking group fell victim to the credit crunch. Since then, the acquisition has met little opposition, until earlier this month when ex-banking chiefs Sir George Mathewson and Sir Peter Burt voiced their concerns.
According to Burt and Mathewson, who called for themselves to be chairman and chief executive of HBOS, the bank could survive on its own.
However, the Chancellor made it clear yesterday that there is no guarantee of Government funding, and that for the Treasury capitalisation to go ahead "The senior management team must be credible, with demonstrable ability to deliver the business plan."
This statement has since been widely perceived as a warning to Burt and Mathewson over their opposition to the Lloyds TSB acquisition.
And, on the back of the Lloyds TSB vote, shares in both HBOS and Lloyds TSB have soared, implying that the merger would, contrary to Burt and Mathewson's beliefs, instil confidence in the banking group.
Meanwhile, Lloyds TSB and HBOS staff are expected to hold a demonstration outside the general meeting to remind shareholders that employees must not be ignored. They will be wearing t-shirts saying: "Secure Jobs = Secure Bank".
Reports of job cuts are in the news every day as a recession takes hold of the UK, and Lloyds HBOS staff are understandably concerned. Unite joint general secretary Derek Simpson said:
"Months of unremitting speculation about the future of HBOS has left long-serving employees feeling insecure about their jobs in an organisation they are very faithful to. Unite is urging shareholders to hear the concerns of staff and support the 'Unite Social Contract' for the future of the new Lloyds Banking Group."
The outcome of the Lloyds TSB EGM is expected later today.
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