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UK government is set to take 43% of Lloyds HBOS

As we approach the end of the fundraising period for the Lloyds HBOS merged entity it has been revealed that the government is expected to end up with 43% of the enlarged group as both share prices are trading below their offer prices. This is likely to cost the UK government in excess of £17 billion and further tighten the government's grip on the UK financial sector. What next?

Once the funding arrangement has been completed there are hopes that the company will then be able to look forward to the future and offer a range of competitive financial instruments which are much needed by the economy. Whether the government will be able to force any real change from within is debatable because so far they have failed to do this despite a majority holding in the Royal Bank of Scotland.

The government now has total control of Northern Rock, total control of the Bradford & Bingley mortgage book, a majority stake in Royal Bank of Scotland as well as an expected 43% of the enlarged Lloyds/HBOS entity. The government has come under even more scrutiny than ever before due to the ownership arrangements surrounding these banks and the potential for abuse of market position.

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