Fresh from the drubbing he received over the decision to refer to the Competition Commission NTL's bid for Cable & Wireless Communications, the present incumbent, Stephen Byers, faces an even more contentious set of mergers decisions over the next few weeks - bids from Bank of Scotland and Royal Bank of Scotland for NatWest Group, one real, the other still "in contemplation".
Whichever way he hops, it is bound to cause a stink. If he refers, he'll be accused of discriminating against the Scots and acting as a barrier to change in the banking industry; if he clears, he'll be accused of destroying jobs and playing fast and loose with the prudential interests of depositors.
Confusingly, Mr Byers has already received the Director General of Fair Trading's confidential advice on the Bank of Scotland bid, but has yet to hear any pronouncement on the Royal Bank. He may therefore find himself making a decision on the one before the other.
There is more of a competition concern in Royal Bank's case than with Bank of Scotland, if only because Royal Bank has a more extensive branch network down south than its Scottish counterpart, and as a consequence has a greater degree of overlap with NatWest. Even so, if Bank of Scotland is cleared, we can be pretty sure than Royal Bank will be too.
Royal's Sir George Mathewson has been beavering away behind the scenes attempting to thrash out an agreed merger plan with NatWest to pitch against Bank of Scotland's hostile proposals. In the event of clearance he'll be wheeling out an offer of pounds 16 a share and upwards, together with a more conciliatory approach to the present NatWest board and management. The betting has to be that he'll eventually outmanoeuvre the Bank of Scotland's Peter Burt.
Should Mr Byers be allowing this triumph of one clan over another, or should he be confining the warring parties to the purdah of a Competition Commission investigation? The case for doing the latter is a largely political and prudential one.
It costs Mr Byers little to refer, outside the wrath of the City and a fresh barrage of criticism from the financial press, and given the job losses involved in both merger proposals, it will play well with the party. Furthermore, there may be something in the argument that there is a degree of systemic risk in the scale of cost cutting proposed. Nothing as large as this has been attempted in Europe before, and some of the smaller precedents of it in the US have been alarmingly unsuccessful.
Against this is the urgent need for new blood, fresh ideas and a more competitive environment in the English clearing bank system. A Scottish takeover of NatWest would undoubtedly help kick-start the process of reform. Not to be underestimated is also the possibility that while the two Scottish banks are before the Commission, a foreign bank might nip in and steal the prize from under their nose. Given the Government's stance on Vodafone's bid for Mannesmann, Mr Byers would find it difficult to justify obstructing any such action.
It is even harder to judge this Secretary of State than previous ones, but in the absence of any compelling argument to the contrary, he should let the market decide. The UK banking industry needs a good kick-up the backside, and this takeover tussle looks like providing it.Reuse content