The demise of one of Scotland's leading financial institutions will have far-reaching consequences for of all parts of the country's economy.

The demise of one of Scotland's leading financial institutions will have far-reaching consequences for of all parts of the country's economy.

The rescue deal with Lloyds TSB is certain to see jobs going and high street branches disappearing, while confidence in financial services, which has become one of the motors of the Scottish economy, will also be shaken.

JOBS/BRANCHES
HBOS employs 65,000 in the UK, with 17,000 of those jobs in Scotland. A further 7200 people are employed in Scotland by Lloyds TSB. Estimates vary widely but some are predicting anything up to one-third of these jobs might be under threat in a merger. Lloyds TSB also has a sizeable presence in branches in Scotland - inevitably there will be closures, especially where there are branches located near each other.

HEADQUARTERS
HBOS has poured millions into refurbishing its landmark headquarters on The Mound in Edinburgh. "There would be political implications if we tried to move one of the oldest banks in the world out of Scotland," said Professor Ronald MacDonald of Glasgow University school of economics.

One of the ironies is that Lloyds TSB officially has its registered headquarters in Glasgow, even though the head office functions are run from London. This is where the new bank is likely to be run from, with the resulting loss of highly paid jobs and of prestige from Edinburgh as a financial centre.

IMPACT ON GLASGOW/EDINBURGH BUSINESS DISTRICTS
Financial services has become a vital part of the Scottish economy, employing around 86,000 in total and contributing £7bn. As well as owning Clerical Medical and Birmingham Midshires, HBOS has phone and online banking firm Intelligent Finance, based in Edinburgh. However, the sector in Scotland was already under pressure. About 16,200 of rival RBS's 170,000 staff are in Scotland. It is expecting to lose 7500 jobs overall after the ABN Amro takeover. Standard Life, another Edinburgh institution, is to shed 1000 jobs by the end of next year. It has 6500 jobs in Scotland. Glasgow's ambitions to create 20,000 jobs in its International Financial Services District will almost certainly be hit by the impact of the credit crunch.

SHARES
HBOS has a large base of small shareholders and it is those people who are likely to be among the biggest losers. If you are a Lloyds TSB investor you might be worrying if there is an underlying problem at HBOS. A lot will depend on the final price of the shares. They were trading as low as 88p yesterday, closing at 147p. A price of about £2.80 might seem like a good deal by comparison. But if you consider the share price was nearly £12 a year ago, this is a bitter pill to swallow for the small investor.

SAVINGS
Savers should be relatively unaffected. The government's guarantee scheme if a bank folds currently pays out the first £35,000 that people have lost, which covers 97% of all savings, although a consultation is currently under way over raising this limit to £50,000. However, consumers do need to be careful that they do not simply spread their cash between different brands that have the same parent company, as this would count as one group.

For example, someone with £35,000 saved with Lloyds TSB should make sure they invest any money above this sum with banks other than HBOS and Birmingham Midshires, if they want to stay within the limit of the FSCS.

MORTGAGES
Together, HBOS and Lloyds TSB will have well over one-quarter of the UK mortgage market. Mortgage interest rates between the institutions are roughly similar (about 7%) and you shouldn't need to re-apply.

"As we know it is already quite difficult to get mortgages, so the merger of HBOS/Lloyds will not have much impact on that," said Professor MacDonald. "The cost of the mortgage again will largely be driven by what the Bank of England decides to do in terms of its monetary policy, and that is very much geared towards inflation."

Louise Cuming, head of mortgages at moneysupermarket.com, said: "For the past few weeks the trend has been for mortgage rates to come down and the number of available mortgage products to increase, giving a glimmer of hope to those looking to remortgage or buy.

"However, since the collapse of Lehman Brothers we've already see a huge jump in the Libor (inter-bank lending) rate and I fear we'll soon see lenders raising mortgage rates due to this."

SPONSORSHIP
HBOS spends around £4m a year on its programme of sponsorship of arts and sport in Scotland and Yorkshire.

Since 2002 it has been the sponsor of The Herald's own prestigious awards given out during the annual Edinburgh festival period, The Herald Angels.

More than 250,000 people have attended the annual Bank of Scotland Fireworks Concert, which is the traditional closing ceremony of the festival period, and the bank has been attached to the Edinburgh International Festival for 60 years in total.

For 25 years, it has put money into Scottish Schools Football sponsorship and it also sponsors the Children's International Theatre Festival (Imaginate).

Recently, the bank also entered into a two-year deal with the National Galleries of Scotland.

Support worth more than £400,000 for the totalArt series was at the time believed to be the biggest art sponsorship deal in Scottish history.

The deal was launched in the summer of 2007 to bring two major exhibitions of contemporary art to the Royal Scottish Academy in Edinburgh.