With permission, I should like to make a statement about the proposed mergers between Barclays, Lloyds and Martins Banks.
The Government have now received representations from the banks, and, in the light of these and other comments and representations, have studied carefully both the conclusions of the majority and the note of dissent by the minority.
The Government accept the conclusion of the majority. The consider that the proposed mergers between Barclays and Lloyds, or between Barclays and Lloyds and Martins together, would be contrary to the public interest, and therefore, should not proceed. The Government see no objection, however, to Martins joining with another bank.
The Government believe it essential to maintain a sufficient number of sources of finance for small and medium-sized businesses, including, in particular, the fast-growing innovating companies, and they consider that the structure of banking which would result if the mergers went through would lead to a less satisfactory competitive situation.
These disadvantages outweigh, in the Government's view, the cost savings to be expected from the merger, especially in the light of the majority's doubts about the likely size and speed of these savings in a less competitive situation.
Moreover, there is a danger that the mergers might lead to pressure for still further concentration and hence eventually to a two-bank system. The Government believe that this pressure would be stronger than the Commission suggests, and they share the view, expressed both by the majority and minority, that a two-bank system would be clearly undesirable.
The Government have noted the criticism, expressed by both majority and minority, of the agreements between the banks on deposit and lending rates. In the light of this criticism, we shall again review the arguments which have hitherto led to the conclusion that these agreements are not, on balance, against the public interest.
The Government have communicated their views on the proposed mergers to the banks concerned, and I am glad to announce that they have informed the Governor of the Bank of England that in these circumstances they do not intend to proceed with the mergers.