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banking business of both banks.
60. Sales of branches to a competitor to the major clearers might provide a more effective solution to any problem of over-supply of retail banking than a planned reduction in branches through closures following a merger between Lloyds and Midland. Whether this is a preferable course to an examination by the MMC of the merger is the most difficult question. The submission examines the arguments on this point in more detail.
IS THERE A CASE FOR APPLYING ARTICLE 21
62. The second indent of Article 21(3) of the ECMR provides that where a merger falls under the ECMR, Member States may nevertheless take "appropriate measures" to protect certain "legitimate interests" (other than those dealt with in the Regulation- ie, competition issues) expressly acknowledged in that paragraph, without reference to the Commission. final indent of Article 21(3) provides that such measures may also be taken by a Member State to protect any other "public interest"; the Member State must communicate such interest to the Commission, and it "shall be recognised by the Commission after an assessment of its compatibility with the general principles and other provisions of Community law before the
may be taken."
measures
63.
It has been suggested (notably by Lloyds) that the UK should rely on Article 21(3) in order to exercise jurisdiction over the HSBC bid. The arguments for doing so are of two kinds: those based on features of the HSBC bid itself; and those which derive from the presence of a competing bid which does not fall under the ECMR and which may be the subject of an MMC reference.
64 In the first category are the arguments listed above as made above by Lloyds about prudential concerns, management ability, taxation, and adverse effects on the national interest arising from the "foreign" nature of HSBC and in particular from its position in Hong Kong, both before and after the transfer to China in 1997. (Employment does not seem to be a significant issue, since HSBC do not apparently plan major redundancies.) All of these are said to justify investigation by the MMC in their own right.
65. There are arguments the other way, however. It would appear that the Bank of England are satisfied on all possible prudential issues. These are in any event matters for the Bank and it is doubtful whether a reference to the MMC would be an appropriate course even if there were concerns in this area. Accordingly it can be said that "appropriate measures" under the second indent of Art. 21(3) are already being taken in relation to prudential matters. On "management ability" there is nothing to suggest that HSBC is other than competent. Taxation is a matter for the Treasury, who have yet to comment, but this point alone would seem not to involve a
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