Alex Salmond today attacked the "spivs" he blames for the downfall of Edinburgh-based banking giant HBOS.
Alex Salmond today attacked the "spivs" he blames for the downfall of Edinburgh-based banking giant HBOS.
Scotland's First Minister said the bank was soundly based - and that financial regulators should have acted to forestall the speculative attack.
His intervention came as HBOS and Lloyds TSB held advanced merger talks - with the details due to be announced tomorrow morning. The news during another torrid day for HBOS shares, which took another hammering in the market.
The talks led to union leaders warning any merger could be "catastrophic" for the 17,000 HBOS staff based in Scotland.
Mr Salmond, a former Royal Bank of Scotland economist, said any merger between the two should be based on measured discussion, not a "shotgun marriage" driven by unwarranted speculation.
He added: "I am very angry that we can have a situation where a bank can be forced into a merger by basically a bunch of short selling spivs and speculators"
He also said the Financial Services Authority had left HBOS vulnerable to speculative attack by failing to act despite finding the banking giant was properly funded and had a good capital ratio.
"We should not have situations where well capitalised, properly funded financial institutions are subject to incredible speculative attack, and that drives them into decision making which they otherwise might not have done.
"You have got to put the hems on that sort of activity, otherwise we will have a succession of companies going through the same process. All financial regulators have got to wake up to where we are at the present moment."
As stocks in the US plunged 350 points, HBOS confirmed talks had taken place and if the effective takeover of HBOS takes place it would lead to major job cuts in Scotland, where the former Bank of Scotland employs 17,000 people, with 320 branches and its headquarters in Edinburgh.
It is believed talks are "very advanced" and could be wrapped up this week and Gordon Brown, the Prime Minister, is understood to have discussed the planned merger.
HBOS employs 72,000 people across the UK and is also a major sponsor of culture and the arts in Scotland.
The Unite union said the merger talks had left the two banking groups' combined 24,000 staff in Scotland fearing for their jobs.
The union warned it would not accept any compulsory redundancies and urged both groups to take a "socially responsible approach" to the deal.
The report initially dragged HBOS and Lloyds shares into positive territory, reversing earlier losses. At one point, HBOS shares were down as much as 47 per cent from yesterday's close of 182p but they closed 35p down at 147p. They were trading at 730.5p on January 2.
Shares in rival Edinburgh banking giant RBS have also been battered since the beginning of the week but at lunchtime today they were down 19p at 169p.
Lloyds shares traded in a narrower range, veering from 10 per cent down from Tuesday's close of 279.75p to 10 per cent higher. They closed flat 279p.
HBOS, parent company of Halifax and the Bank of Scotland, has come under pressure because of its exposure to the US subprime mortgage market, raising questions about whether it can refinance its debt of more than £100m in the coming months.
The company insists that it has no problems raising money.
The Financial Services Authority, the financial regulator, weighed in today with assurances that HBOS was secure.
HBOS is the UK's banking giant taking pole position for both mortgage lending and savings.
The group, based at The Mound in Edinburgh, is the country's biggest mortgage lender, writing around one in five of all new home loans during 2007.
It also has the biggest mortgage book in the industry with outstanding home loans of £235 billion, double the figure for its nearest rival Nationwide, which has £118.9 billion in outstanding home loans.
HBOS is also the UK's largest savings institution, holding deposits totalling £258 billion for both consumers and businesses.
It has a 16% share of the savings market, meaning that for every £100 saved by people in the UK, £16 is deposited with Halifax or Bank of Scotland.
The group is also expanding in the current account market, and around 22% of all new current accounts opened during 2007 were with HBOS.
Overall the group has 22 million customers, including consumers and businesses.
But HBOS's most recent financial results showed that its share of the net mortgage market was slipping.
During the first six months of this year the group's share of net mortgage lending, which takes into account people moving their home loan to a different provider, fell to 7%, down from 15% during 2007, after it pledged to put margins before volumes.
It also revealed sharply lower profits and said it was concerned about rising bad debts as customers struggled with repayments.
The interim results showed that pre-tax profits for the six months to the end of June plummeted 72% to £848 million.
At the same time it saw a 36% leap in bad debt charges to £1.31 billion, which it said could rise further as hard-pressed customers ran into problems with repayments and house prices continue to fall.
