The UK Competition Commission is investigating possible remedial action relating to the proposed £19 billion take over of Abbey National by Lloyds TSB, including the enforced sale of high street bank branches and divestment of the Cahoot Internet banking business.
The imposition of sanctions depends upon whether the Commission finds that the merger operates against the public interest. The severity of the action will be determined by the Commission's findings on levels of competition in the UK banking sector, and the likely impact of a combined Lloyds TSB/Abbey National operation in weakening or strengthening the competitive environment. The regulator is particularly concerned about the degree of competition in the UK current account market and the high incidence of account inertia.
Possible remedial measures range from the prohibition of the merger to the sale of branches and divestment of existing businesses, through to relatively minor sanctions regarding the terms of products offered by the enlarged group and the improvement of customer awareness of alternative options.
Lloyds TSB has already indicated that it would be prepared to sell Abbey's stand-alone Internet bank Cahoot, but it would balk at being forced to offload Cheltenham & Glucester. The mortgage subsidiary was named by the Commission, alongside Cahoot, as one of a number of businesses which might have to be sacrificed for the takeover to gain approval.
The Commission is inviting interested parties to comment on the principal issues by 27 April 2001. The regulator will be holding private talks with Lloyds TSB and Abbey National executives shortly after Easter.