By Colin Donald

AFTER another week of turbulence in which takeover rumours buffeted the share price of HBOS, Scotland's second largest financial services company, the cabinet secretary for finance has given the strongest signal to date that the Scottish government would intervene to prevent the loss of the 300-year-old bank.

Talking to the Sunday Herald about the troubles a sector central to Scotland's economic strategy, Swinney said that government ministers and officials had maintained a "regular flow of communication" with HBOS management throughout its recent months of trauma at the hands of the City, and that it would "look very carefully and closely" at any challenges to the bank's independence Swinney said that he "read the newspaper comment like everyone else" and added: "Our priority will be to ensure that the ownership of the organisations is such that it continues to make a significant contribution to the Scottish economy."

While stressing that the Scottish government had no formal powers to block a hostile cross-border bid, and emphasising that he was not speculating about the future of HBOS or any other institution, Swinney said that the Scottish government would "want to ensure that the ownership of the Scottish banks is anchored very firmly here in Scotland."

"Maintaining strong and effective headquarters is in Scotland is one of the things that the administration believes is essential for the stability of the Scottish economy. We will encourage that process as far as we humanly can, " he said.

"If the government feels it necessary to make any representations, then we won't hesitate to do so."

HBOS's share price plunged 17% in March after alleged malicious rumours by short sellers, though an FSA probe reported on Friday that there was "no evidence" of a "concerted attempt" by individuals to profit. Since then HBOS shares have suffered a torrid ride, in recent weeks as persistent rumours - and the denial of those rumours - involving putative bids by institutions such as the US investment bank JPMorgan, and the Spanish banks BBVA and Santander. and even the troubled National Australia Bank group, owner of the Clydesdale and Yorkshire banks.

Ongoing speculation is in defiance of analyst opinion that any takeover attempt amid the current liquidity crisis would be a "long shot".

HBOS's shares ended the week at 302.25p, 11.75 points or 4.04% up, the day after the bank's results showed a better than expected 56% plunge in first-half net profit on Thursday.