Chancellor George Osborne has denied accusations he got involved in a mooted deal between Co-op Bank and Lloyds for hundreds of branches across the UK.
Lloyds, which was bailed out by the government in the middle of the recession to prevent it from going under, was seeking a buyer for 632 branches and Co-op Bank was among the parties believed to be interested in the deal.
Some reports had claimed the Treasury was keen for this deal to go through, but Mr Osborne has denied he put pressure on the two banks to put an agreement for the branch sale together.
In a letter to the Treasury Select Committee, the chancellor said the deal "was a matter for Lloyds and the-then regulator, the [Financial Services Authority]".
The Treasury Select Committee has been investigating to see whether or not there was any interfering from the government when the deal between Co-op Bank and Lloyds was put forward.
Labour MP Pat McFadden said the committee has heard "conflicting advice on whether there was political pressure" and he cited evidence that was given by Lord Levene, who was leading a rival bid.
Submitting evidence to the committee earlier in the year, Lord Levene wrote: "We had contacts with senior banking figures, during which it was made clear to us that pressure on LBG [Lloyds] to appoint the Co-op was coming from within the coalition."
The deal with Co-op Bank did not go through, with the Lloyds branches coming under the TSB banner, while Lloyds continues as a partly taxpayer-owned bank in its own right.
Lloyds is one of two banks in the UK that remains partly state-controlled, as Royal Bank of Scotland also needed to be bailed out by the government because of financial issues caused by the global crash and the subsequent recession.
The government has already sold off some of the Lloyds shares it purchased as part of that bailout and is reported to be considering selling off the rest of the stocks later in the year.
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