'Give HBOS investors a vote on RBS-style bail-out'

HBOS shareholders should be allowed to vote on whether their bank should be part-nationalised and remain independent, one of Scotland's leading businessmen said last night.

Jim Spowart, the founder of Intelligent Finance, said the option should be on the table alongside the bank's proposed takeover by Lloyds TSB.

By presenting the two cases equally, he believes the bank would allow shareholders to have a clearer view of the strengths and weaknesses of both routes. At present, shareholders are set to only have a yes or no vote on the takeover deal.

His intervention came as an investment bank told The Scotsman HBOS could survive with its part of a government cash injection.

Under that scheme, shareholders would be left with 30-40 per cent of the Scottish institution while the Treasury would take on the rest. It would give HBOS the chance to stabilise its books and return to a fully private position further down the line.

The calculation by boutique investment company Euro-IB would leave HBOS in a similar position to RBS, which is to concede 60 per cent ownership.

It comes as questions are growing over whether shareholders' interests were properly represented in the negotiations about the bank's future. Concerns have also been raised about the role non-executive directors had in the discussions.

Meanwhile, the Office of Fair Trading has extended the deadline for objections to the government waiving competition law to allow it to happen. The date has been put back to allow correspondents to revise their submissions in the light of the changing financial climate.

The move was requested by the government's Business Enterprise and Regulatory Reform department. Mr Spowart said the option of a government buyout would have made such a waiver unnecessary.

He said: "We don't know what the other option is and the board should have considered that option. If the board say this option is better than the other because of X, Y and Z, fine, but the government seem to have put a gun to their head.

"Option B is the nationalisation part – of 30 per cent and that would mean we would be able to retain independence. I think the shareholders should get to vote on this – do they want an independent bank or one swallowed up by Lloyds?"

This week, The Scotsman revealed a consortium of businessmen across a wide spectrum of industries – including Sir Tom Farmer – had written to politicians north and south of the Border expressing concerns. Yesterday, investment analyst Ian Blackford of First Seer joined the list.

A second letter, from Euro-IB, has also gone to Westminster's Treasury select committee demanding further answers before the competition law is waived.

Written by Alexander von Ungern-Sternberger, the chief executive of the firm and a former group treasurer of Deutsche Bank, it states: "In finance, as in politics, decisions taken in haste are sometimes repented at leisure. One fears this may be the case with this proposed transaction.

"The merger never made sense from the point of view of the HBOS shareholders (wrong solution to the liquidity problem), the customers of either bank (competition issues), Lloyds shareholders (weakened capital structure due to acquisition burden) or the employees of either bank (job losses).

"No argument favouring the merger remains other than concerns about further declines in UK house prices further weakening HBOS (due to the property-skewed loan portfolio) and less well defined political arguments (relating to Scotland, the SNP and the Labour Party)."

His colleagues also calculated how much of a share in HBOS the government would have if it recapitalised the bank on the share price Lloyds valued it at the time.

However, Shane O'Riordain of HBOS said: "It would be very wrong for any company, including HBOS, to base its business model on state help.

"It's also wrong for any business to assume that government schemes are a complete substitute for normal market forces. They are not."

He said the bank was still of the view that the deal was best for its stakeholders.

The institution, he said, was of the view that "the world has changed irredeemably in the last 12 months of so. In particular, the outlook for wholesale money markets has changed. The era of high liquidity and easy credit is over and will not be returning".

Mr O'Riordain said: "In the new world there will be much less wholesale money available and it will be a lot more expensive. It's therefore very important that HBOS is part of a bigger and stronger group which is able to raise a lot more funding of its own. That's crucial for a bank. The deal does exactly that.

"We have an excellent group of non-executive directors with extensive experience of the commercial world, including banking. They have very carefully considered the options available to HBOS. That is why our board is recommending shareholders vote in favour of our proposed acquisition."

• It was announced yesterday that Sir Fred Goodwin, the chief executive of RBS, will step down from the role and that of executive director on 21 November. His replacement, Stephen Hester, will take up the role on that date but Sir Fred will remain with the group until 31 January.



Readers voice their concerns over deal

"I'm going to vote against the takeover. I feel it's a simple political ploy, a hugely Machiavellian ploy, by Brown to weaken the whole Scottish culture and economy."

George Cunningham, 73, retired insurance director, Musselburgh

"If the takeover goes ahead, I will close my Bank of Scotland account. I have been with the bank for 40 years and was satisfied with them until the 'merger' with Halifax when all priorities changed. I have no intention of now becoming a Lloyds customer. Please keep up the pressure."

Kate McGibbon, Isle of Cumbrae

"I worked for the Bank of Scotland when it merged with Halifax, and at the time it felt like the ethos of the organisation was changing and something was being lost. I'm worried not just worried for the bank but for Scotland."

Margaret Finnie, 66, Cardrona near Peebles.

"As an HBOS shareholder I have been forced to sell my shares, resulting in a serious loss. I had put aside money which was supposed to be something for when I retire. I'm outraged with the way that the deal has been handled."

Ashar Aftab, 33, economics lecturer at Durham University, from Edinburgh