Treasury select committee member Andrea Leadsom has called on the Government to break up Lloyds Banking Group by reversing the HBOS and Lloyds Bank merger of 2008.
Speaking at a Co-op fringe event on banking at the Conservative conference in Birmingham last week, Leadsom said the Government should never have allowed the deal.
With HBOS on the brink of needing a state bailout in September 2008, the Government waived competition rules to allow takeover talks with Lloyds Bank.
The merger completed in January 2009 and led to the creation of Lloyds Banking Group, which was forced to sell 632 branches under European competition law in exchange for the Government bailout.
Leadsom said: “The Government should never have done it and it has absolutely destroyed the value of one very good bank in favour of another.
“If we did reverse it, while there would be absolute horror in the banking world and among shareholders, it would ensure that no Government would ever do such a thing again. How can we now have a bank that owns 42 per cent of the mortgage market? It is just ridiculous and I would reverse it.”