What does this mean for HBOS and Lloyds TSB customers?

Not much at first, regulators hope. The aim would be to restore confidence in HBOS and to pre-empt the danger that depositors withdraw their money and institutional clients start to shun HBOS.

So are my savings now safe?

Yes. They always were. It was unthinkable that the Government would have allowed the 15 million ordinary HBOS depositors to lose a penny. But the proposed merger makes a damaging run less likely.

Will my local branch survive?

Quite possibly not. Rival bankers say hundreds of branches are likely to be closed, possibly as many as 1,000. Lloyds has 1,900 branches under the Lloyds TSB and Cheltenham & Gloucester brands, while HBOS has 1,100 under the Bank of Scotland, Halifax and Birmingham Midshires names. There is barely a high street where the two do not trade side by side. Much duplication would be cut.

Will my mortgage be affected?

In the short run, no. In the long run, if the deal restores financial stability, it should ease the paralysis in the wholesale money markets, making it easier and cheaper to secure a home loan. However, there is one important caveat: the combined entity would have a huge market share in mortgages, potentially reducing competition. It is not clear whether authorities would be able to prevent it abusing that potential stranglehold.

Is this a bad time to open a current account with Lloyds or HBOS?

Not really. It will be months before the two entities could be actually nailed together. But there may be disruption ahead: as well as branch closures, there could well be a cull of call centres and other back-office arrangements. However, banks in the process of consolidation try to ensure the upheaval has as little effect as possible on customer service. The seismic changes will be for the employees, many of whom are likely to lose their jobs.

Will the brand names survive?

That isn’t clear. Initially, they probably would, so long as the managers of the combined entity do not feel that HBOS brands have been too tarnished by the past two days. Individual products could eventually be merged if their terms allow.

What about rival banks?

A deal like this would normally provoke fury from other banks who would worry they were being put at a competitive disadvantage. But all banks recognise that the restoration of confidence in the entire banking sector is the great priority now. They are hoping that the monopolies issues can be tackled later, when calm is restored.

What does it mean for me as a small shareholder?

Nearly three million Britons hold shares in the two banks. If the deal goes ahead, HBOS shareholders are set to be given new Lloyds shares worth 232p for each HBOS share, a huge fall in value from the £10 a share HBOS was trading at 18 months ago, but still better than the worst case scenario of being wiped out. Lloyds shareholders will own a smaller proportion of the enlarged bank. Theymight be offered the opportunity to subscribe for further new shares.

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