UK Banking Licence Consolidation

On 17 September 2007, the HBOS Group's four banking subsidiaries and banking licences in the UK were consolidated into a single legal entity with a single licence. On that date Bank of Scotland, which registered as a public limited company and was renamed as Bank of Scotland plc, succeeded to the business, assets and liabilities of Halifax plc, Capital Bank plc and HBOS Treasury Services plc (HBOSTS).

There are no changes to the activities or brands of the HBOS Retail, Corporate, Insurance & Investment, International and Asset Management businesses.

Moody's, Standard & Poor's, Fitch & DBRS have reviewed our credit ratings and confirmed that the consolidation has no negative impact on them. Please click here to view our credit ratings or click on the documentation links to see details of the agency affirmations.

For background details and to access copies of related documentation, please see the information laid out below.

Background

The merger in 2001 of Halifax Group plc and The Governor and Company of the Bank of Scotland (Bank of Scotland) to form HBOS plc resulted in the HBOS Group having the following four banking licences in the UK: The Governor and Company of the Bank of Scotland, Halifax plc, Capital Bank plc and HBOSTS.

In order to remove duplication and streamline administration of the HBOS Group's banking businesses in the UK, the HBOS Group Reorganisation Act 2006, which received Royal Assent on 21 June 2006, provides for the reorganisation and consolidation of these subsidiaries.

The UK Financial Services Authority has reviewed HBOS Group's proposals and confirmed that Bank of Scotland plc will be treated as a continuation of Bank of Scotland. Regulators in other countries, including Australia, the United States and the Cayman Islands, have also been fully informed of the HBOS Group reorganisation and the implications for HBOSTS. HBOS Group's approach to the consolidation has been agreed with these regulators.

For an abridged organisational structure chart for the HBOS Group pre and post consolidation, please click here .

Impact on HBOS Treasury Services plc (HBOSTS)

Since 17 September 2007, the treasury business of the HBOS Group, previously undertaken by HBOSTS, has become a separate operating division of Bank of Scotland plc to be known as Bank of Scotland Treasury. Bank of Scotland Treasury issues securities in the name of Bank of Scotland plc which is its legal name for documentation purposes.

Impact on Debt Issuance

All existing subordinated debt issued by HBOS plc will remain outstanding in that name and future issuance will be in the name of HBOS plc. None of the outstanding senior unsecured debt issuance, excluding that issued by Bank of Western Australia (BankWest) or BOS International (Australia) Limited (BOSIAL), will be recalled or reissued as Bank of Scotland plc will automatically succeed to it without any further action being required. There will be no impact on the underlying obligation of any outstanding debt issues. For full details, please see the table below:

Type of Debt	Pre-consolidation issuer	Post consolidation issuer	Implications
Senior unsecured debt under 'EMTN Reg S' & 'US144A MTN' programmes	HBOS Treasury Services plc	Bank of Scotland plc	Outstanding debt issued by HBOSTS will be automatically renamed Bank of Scotland plc. It will remain guaranteed by HBOS plc. There will be no need to take any action.
Debt issued by HBOS Treasury Services plc, Sydney branch under the Australian domestic 'debt issuance programme'	HBOS Treasury Services plc	Bank of Scotland plc	Outstanding debt issued by HBOSTS will be automatically renamed Bank of Scotland plc. There will be no need to take any action
CP & CDs	HBOS Treasury Services plc	Bank of Scotland plc	Outstanding debt issued by HBOSTS will be automatically renamed Bank of Scotland plc. There will be no need to take any action
Yankee CDs	HBOS Treasury Services plc	Bank of Scotland plc	Outstanding debt issued by HBOSTS will be assumed by Bank of Scotland plc. There will be no need to take any action
Covered Bonds	HBOS Treasury Services plc	Bank of Scotland plc	Outstanding debt issued by HBOSTS will be automatically renamed Bank of Scotland plc. There will be no need to take any action
Senior unsecured debt	Halifax plc	Bank of Scotland plc	All outstanding debt issuance, except debt issued by BankWest or BOSIAL, will be automatically renamed Bank of Scotland plc. There will be no need to take any action
	The Governor and Company of the Bank of Scotland	Bank of Scotland plc
	HBOS Treasury Services plc, Sydney Branch	Bank of Scotland plc
	BOSIAL	BOSIAL
	BankWest	BankWest

Credit Limits

With effect from 17 September 2007 counterparties are requested to aggregate their credit limits for the four banks into a single limit for Bank of Scotland plc. If credit limits are already set at HBOS plc Group level and Bank of Scotland is already included as a counterparty, no further change is required. For additional guidance on credit limits or other operational changes please see contacts below. Please click here to see the pro forma financial information for Bank of Scotland.

Contacts

Nature of Enquiry	Contact
Enquiries relating to changes affecting the Group's treasury business	Please email: investorrelations@bostreasury.com
All equity investor enquiries	Please email: investorrelations@hbosplc.com

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