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Lloyds TSB buys HBOS

Lloyds TSB will pay £12.2bn for HBOS in a rescue that will create the country's biggest bank. It is a takeover, not a merger; so all HBOS companies will be integrated into Lloyds TSB, sold or closed.

The deal was thrashed out over 48 hours against a backdrop of HBOS's tumbling share price. The new group said it will retain a strong corporate presence in Scotland and will hold key meetings there.

The Government is waiving normal competition law to help the deal through. But it faces a tumultuous passage through Parliament before it completes in about three months.

HBOS had no choice but to find a "white knight" to protect it from bankruptcy, as happened at Lehman Brothers when the market ran out of goodwill for the bank.

The FSA, who helped find a suitor, says that the merger with Lloyds TSB is a welcome move as it is likely to enhance stability within financial markets and improve confidence among customers and investors in the UK financial sector.

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Lloyds TSB buys HBOS
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