Darling says will change law to allow Lloyds/HBOS deal

LONDON (Reuters) - The government will legislate to modify competition law to allow the Lloyds TSB and HBOS merger to go ahead in the interests of financial stability, chancellor Alistair Darling said on Thursday.

Darling said Britain's financial supervisory authorities believed such action was appropriate as the merger between the two banks confirmed earlier on Thursday was "in the interests of consumers and the wider economy."

"The current circumstances in the financial markets are truly exceptional. In recent days the financial markets across the world have seen an unprecedented level of uncertainty," Darling said.

He said the government would change the legislation under Section 42 of the Enterprise Act which allows it to extend the grounds for considering public interest.