Lloyds TSB takeover of HBOS cleared

By Adrian Croft

LONDON (Reuters) - Business Secretary Peter Mandelson gave the go-ahead to Lloyds TSB's takeover of rival bank HBOS on Friday despite concerns about the merger's impact on competition.

"I am satisfied that on balance the public interest is best served by allowing this merger to proceed without a reference to the Competition Commission," Mandelson said in a statement.

HBOS welcomed the decision and said it was a "major milestone."

"This deal is very much on track," HBOS spokesman Shane O'Riordain said.

Mandelson disregarded the advice of the Office of Fair Trading (OFT), which concluded after a month-long review that further investigation of the deal by the Competition Commission, Britain's competition watchdog, was warranted.

The OFT said in its report to Mandelson that the merger was likely to substantially reduce competition in the market for mortgages, current accounts and banking services for small businesses.

Lloyds TSB announced last month it was rescuing HBOS, the biggest mortgage lender, which had been hit by a deepening global financial crisis and concerns about its exposure to a weakening housing market.

The deal was only made possible because the government said it was prepared to waive the usual competition rules because of the turmoil in financial markets.