Finance

Lloyds TSB takes over HBOS as central banks inject cash into markets

Article published on the 2008-09-18 Latest update 2008-09-18 14:10 TU

(Photo: Reuters)

British bank HBOS has been bought out by Lloyds-TSB as world central banks announced joint action to try and calm the current global financial crisis. Markets in Asia dropped in trading in Thursday although in London news of the HBOS helped them to rally.

The British bank Lloyds TSB announced a takeover of the HBOS bank on Thursday after HBOS' shares dropped 52 per cent. This came one day after the financial regulator described HBOS as "a well-capitalised bank that continues to fund its business in a satisfactory way".

Following the announcement the regulator said it was "a welcome move as it is likely to enhance stability within financial markets and improve confidence among customers and investors".

European markets did in fact rally after the news with London's Ftse index rising 1.13 per cent. It had lost almost 10 per cent in the first half of the week.

The 15.4 billion euro deal is to be permitted by the UK's competition watchdogs despite the fact that the buy-out leaves the bank in control of almost a third of Britain's savings and mortgages. The deal will probably mean job losses from the combined staff of 145,000 according to analysts.

Market analyst Edmund Shing told RFI that the market was settling down today. "The deal has laid to rest certain fears over short-term funding at least because HBOS was clearly a target of those who thought that liquidity would continue to be a big concern," he said.

In the US, newspaper reports said the bank Morgan Stanley was negotiating a merger with another firm.

The Russian stock market was closed for the third day running on Thursday as the Bank of Japan injected 16.5 billion euros to support its markets and the US Federal Reserve released 180 billion in available cash. 

World central banks announced joint action to try and stem the current finance crisis. The European Central Bank announced a 25 billion euro injection into the markets to encourage liquidity as banks and financial institutions struggled to find cash.

The central banks of Canada, England, Japan, Switzerland and the US Federal Reserve said joint action would "address the continued elevated pressures in US dollar short-term funding markets".

Swap facilities were announced by the Federal Reserve with the Bank of Japan (up to 40 billion euros), the Bank of England (up to 27 billion euros) and the Bank of Canada (up to 7 billion euros).

On Thursday markets in Asia dropped in Hong Kong, South Korea and Thailand while Japan's share prices hit a three-year low.