A bank no-one wants to do business with is a dead bank. HBOS came perilously close to proving the truth of that maxim as the credit crunch wreaked havoc on its share value and led to early signs of a Northern Rock-style run on the bank by savers and depositors.

A bank no-one wants to do business with is a dead bank. HBOS came perilously close to proving the truth of that maxim as the credit crunch wreaked havoc on its share value and led to early signs of a Northern Rock-style run on the bank by savers and depositors. The Scottish-headquartered business, Britain's biggest mortgage lender, was pulled back from the brink yesterday by a proposed merger with Lloyds TSB that is expected to be completed today. A rescue takeover of HBOS is a more accurate description of a deal that, until recently, would have been unthinkable.

It is a measure of crisis in the global economy that a deal valued at £15bn to create a colossus in the British banking sector could, potentially, be wrapped up in 72 hours; and that the Westminster Government is prepared to amend the law to override the Competition Commission in the interests of pushing the merger through. A public interest clause in the Enterprise Act, invoked in the name of delivering financial stability, enables ministers to do just that. It is difficult to demur. These are exceptional times. Had the government failed to clear the path for a deal to be done promptly, and had HBOS failed as a consequence, ministers would have had no alternative but to prop up the bank in the way they intervened effectively to nationalise Northern Rock, at greater cost to the taxpayer.

On balance, merger with Lloyds TSB is probably the best deal on offer, especially if it provides stability, protects savers and restores the vital ingredient of confidence, without which no financial institution can survive, as events have demonstrated on the other side of the Atlantic, resulting in the demise of once-great banks or causing the Federal Reserve to use public funds to mount multi-billion dollar rescue operations in the home of free-market capitalism.

Caveats must be applied, however. The deal, when completed, will involve Lloyds TSB reeling in a much bigger catch than it could have hoped for in less fraught times. Its move for Abbey several years ago was blocked on competition grounds. A combined HBOS Lloyds TSB entity would control 28% of the British mortgage market and manage a much bigger portfolio of savers' and borrowers' accounts. The competition regulations, by-passed in this case, were put in place for a very good reason and vigilance will be required to ensure a huge institution is not created that can abuse its market position.

The behemoth would have 3000 branches, 33 million customers and 142,000 staff. Given that mortgage approvals are at one-third of the level of a year ago; Lloyds TSB's propensity for moving jobs offshore; and the potential for economies of scale, there must be a likelihood of major redundancies. An estimated 10% of jobs going would result in more than 14,000 people losing their livelihood. The implications of merger have a particular resonance for Scotland, given the possibility of the HBOS corporate headquarters moving from Edinburgh to London. That would be a sad day indeed (and a paradoxical one with the SNP in power in the Holyrood Parliament) as Bank of Scotland is the oldest clearing bank in Britain and has a story inextricably woven into Scotland's economic and political history. Such an outcome would be yet another baleful manifestation of a period of turmoil, unprecedented in 80 years, that has left people reeling from the boardroom to the front room.