Nov. 26 (Bloomberg) -- John Vickers, chairman of the U.K.’s Independent Commission on Banking, said that it was a “mistake” to waive competition laws in 2008 allowing Lloyds TSB Group Plc to acquire HBOS Plc.
Presenting a paper to the Bank for International Settlements in Lucerne, Switzerland, on June 25, Vickers questioned the British government’s decision to waive competition law during the financial crisis of September and October 2008.
“Relaxation of competition law was not a good way to help financial stability in this case, and as the subsequent problems of Lloyds Banking Group have shown, it may have worsened it,” he wrote, saying the decision “would appear to have been a mistake.”
Vickers, 52, an Oxford University professor and former Bank of England official, had been appointed chairman of the commission nine days earlier, on June 16. He wrote in notes to the document that his draft was written “well before I was invited to chair” the independent panel. Its terms of reference require it to consider whether banks should be broken up to improve competition.
Lloyds, the U.K.’s biggest mortgage lender, may be recommended for breakup by the five-member panel, according to committee member Clare Spottiswoode on Nov. 20.
Lloyds spokeswoman Sara Evans declined to comment on the story, as did the U.K. Treasury, while a spokesman for the commission was not immediately available to comment. The story was reported earlier by Sky News.
The Lloyds’ takeover of HBOS “did pose clear risks to competition,” Vickers said in the paper and full nationalization would have allowed “a more competitive solution.”
The combined Lloyds Banking Group Plc required a bailout of more than 20 billion pounds from the government, which took a 41 percent stake in the bank.
Lloyds has to sell 600 branches by 2013 to comply with European Union rules on state aid. The commission may seek an “expanded carve-out” of branches rather than a full de-merger, wrote Ian Gordon, an analyst at Exane BNP Paribas SA in a note to investors this week. He has an “outperform” rating on the stock.
The commission is scheduled to report on its conclusions in September.
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