The Trade and Industry secretary has referred the proposed takeover of Abbey National by Lloyds TSB to the Competition Commission
Stephen Byers says he made his decision in accordance with the advice of the Director General of Fair Trading (DGFT).
Mr Byers said: "The DGFT has advised me that this proposed acquisition raises competition concerns which warrant reference to the Competition Commission.
"The proposed merger would lead to the elimination from the market of one of the
most significant branch-based competitors to the UK's four largest banks.
"This might result in a substantial lessening of competition, particularly in the market for current accounts.
"The merger would also remove a potential competitor in the provision of banking services to small to medium-sized companies."
The Commission is to make its report by 12 June 2001.
Unions immediately are welcoming the decision.
Rory Murphy, joint general secretary of Unifi, the main banking union, said: "This is good news for staff and customers. It also sends a strong message to the larger banks that the carve-up of the finance sector will not proceed unchallenged."
Linda Rolph, general secretary of the Abbey National Staff Association, added: "We hope the Competition Commission will give greater consideration to the consequences of branch closures and the impact of this takeover on the socially and financially excluded."