So who is it we are bailing out?

The phrase 'Greek bailout' is very much part of the current financial lexicon but ultimately the potential bailout is for the French and German banks who have loaned the profligate Greeks the money to burn in the first place. Now given that increasing the bailout fund requires changes to EU law and that state subsidy is supposedly frowned upon by the EU, there are of course notable exceptions which I won't mention. where does this actually leave us in terms of what is the right thing to do morally, financially and legally?

The Battle for 600 Lloyd's Branches doesn't sound as sexy as the Battle of Midway or the Battle of Oregreave, two extreme examples I know, but it is something that should be remembered if the 'Greek problem' is resolved by the way of additional funding for the French and German banks - more so the French than the Germans it has to be said.

A little revision of what happened three years ago:

 It started in 2008 when the UK Government, the European Commission and Lloyds Banking Group (LBG) agreed to a divestiture (sale) as one of the remedies to the distortion of competition caused by government support to LBG during the financial crisis. LBG committed to divest the TSB brand with a retail banking business of at least 600 branches located in England and Wales, and at least 4.6% of the UK personal current account (PCA) market and 19.2% of LBG’s retail mortgage assets. The group also made commitments on the average quality and profitability of the divestiture and its branches. It must demonstrate that it has approached potential buyers by 30 November 2011. The sale must be completed no later than 30 November 2013. The buyer of the divestiture may not have more than 14% of the PCA market in the UK after the purchase. Add the Independent Commission on Banking (ICB) set up by the Treasury wants Lloyds to be ordered to sell "assets and liabilities" in addition to those that the European Commission is already obliging Lloyds to sell, to reduce its substantial market share in personal banking. If implemented, this would force Lloyds to sell more branches on top of the 600 it is already auctioning. The chief executive of Lloyds, Antonio Horta-Orsorio - with the full backing of Lloyds' board - is implacably opposed to selling "even one extra branch" on top of the 600 branches Lloyds is already being forced to sell

Now Phase 1 was the lodging of bids by interested parties, this had to be completed by 31st July this year and those who were initially interested included: NBNK, NAB, Virgin Money and BBVA. The other British banks weren't allowed to bid due to their existing market share, RBS couldn't bid because it too is in the process of selling more than 300 branches and of course LLoyds itself couldn't bid for any of the branches. There are rich pickings to be potentially had here because the estimated profit for the new company could be around £1.5 billion a year.

Anyway once the bidders had been identified (Phase 2) and notified then the next phase - Phase 3 begins, this is the due diligence process. Due diligence is vital in establishing whether or not the future trading profitability of the purchased share of the market is actually worth the capital investment. What is interesting here is that being such a specialised market the involvement of the company directors will be more 'hands on' than is normally the case, in fact usually (where the company involved is a PLC (public limited company) or confusingly a PLC (private limited company) the potential investors will rely almost exclusively on their professional advisors and pay through the nose for the privilege - I know of one case where a large insurance company was sold three years ago and the due diligence process cost over £4 million.

The point is, if French banks can be saved without repercussions why can't British banks?