Has something hallucinogenic been slipped into the drinking water in Edinburgh? The proposal by Sir Peter Burt and Sir George Mathewson for HBOS to send Lloyds TSB packing, sack its chairman and its chief executive and welcome the two Scottish knights out of semi-retirement is being greeted with deep scepticism south of the border.

On competition grounds, there might well be a case for the takeover to be derailed, but there seems little, if any, upside for shareholders in HBOS and Lloyds TSB. For them, the fact that competition rules have been waived to create a monolith with scope for massive cost-cutting is one of the few positives from this banking crisis.

Sir Peter and Sir George have so far come up with not a single backer for their plans. Their website, independenthbos.com, supposedly designed to win over HBOS's two million small shareholders, consists of three words, “Site Under Construction”.

Their letter to the HBOS board is a masterpiece of patronising faux-sympathy. “We recognise that you and your colleagues have endured a traumatic year and are doubtless suffering from the inevitable fatigue that the situation has created.” However, it contains not a word of what they would do differently, except for having nothing to do with Lloyds.

It is true that HBOS seems to have got the fuzzy end of the lollipop in this deal. Lloyds has already sweetened its side of the bargain several times. That is not a reflection of HBOS's negotiating “fatigue” or incompetence, however, but of its feeble negotiating position. With its dependence on wholesale funding and its vast exposure to UK housing and commercial property, both sinking as fast as ever, it hasn't had a strong hand to play.

For many shareholders with stakes in both banks, the precise terms do not matter much. What they lose on their HBOS holding, they gain on their Lloyds shares.

Sir George, an avid Scottish nationalist, insists that the proposal is not political. He deliberately kept silent until the outcome of the Glenrothes by-election was known.

English investors, however, are likely to be rather more suspicious. As one put it yesterday, this looks more about the Scottish knights being able to hold their heads high at the golf club than a serious intervention on behalf of all shareholders.

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