HBOS would not have survived on its own, but Scotland is still doing OK

Scottish bankers lamenting the ongoing redundancy announcements coming from Lloyds Banking Group should bear one thing in mind - HBOS would have failed without intervention.

At least that's the view of Archie Kane, executive director of the bank, who was presenting evidence to the ongoing Holyrood banking inquiry. He said that HBOS was "finished as an entity" when it was taken over by Lloyds for 12bn last year.

His words are unlikely to provide much comfort to the hundreds of Scottish bankers affected by redundancies as a result of the integration.

But, he said: "We were aware clearly of the problems, particularly in the commercial and corporate lending markets. The thing we did not predict, and in fact very few people did predict, was the steep and rapid decline in the economy in [quarter] four of last year and into this year."

After the HBOS purchase, the newly-formed Lloyds Banking Group still had to accept 17bn in state money to stay afloat, making the group 43% taxpayer owned.

In spite of the problems affecting its banking sector, Lloyds believes that Scottish financial services industry is still good shape.

In a written submission to Holyrood, it said: "Firms in the insurance and asset management area have largely come through the recent crisis in good shape and most reports into the competitiveness of the financial sector have confirmed Scotland has maintained a strong position."