SIMON BAIN and MICHAEL SETTLE

Calls were made last night for the proposed merger of HBOS and Lloyds TSB to be halted after comments from the Financial Services Authority (FSA) suggested the Scottish bank had enough money to survive on its own.

Remarks made in Edinburgh by Hector Sants, chief executive of the FSA, were seized on by Alex Neil, the SNP MSP, as proving the merger or effective takeover of HBOS by Lloyds TSB was "unnecessary".

Mr Sants made clear that the City watchdog was "content" with the amount of capital being raised by HBOS but that it was the general tripartite view - also involving the Treasury and the Bank of England - that it was in the "interests of financial stability for the merger to go through". Some £11.5bn is being raised on the HBOS side of the deal.

Last night, Mr Neil noted how Mr Sants had said in a reply to a question from leading businessman Jim Spowart that he "is content that HBOS has sufficient capital to operate as an independent bank". This, insisted the Nationalist MSP "blows the case for a merger between HBOS and Lloyds TSB out of the water".

He added: "Gordon Brown and Alistair Darling, who are forcing this merger on HBOS, need to go back to the drawing board. If this merger goes ahead, it will result in up to 40,000 job losses and create an unacceptable monopoly.

"Many of these job losses will be in Alistair Darling's own constituency, Edinburgh South. It will be political suicide for him to proceed with such an ill thought-out merger. Every effort should now be made by people in Scotland to stop this merger going ahead," he added.

Last night, a spokesman for First Minister Alex Salmond told The Herald that questions still remained about the merger but that it was the "only option on the table" and so it was the Scottish Government's responsibility to ensure the maximum number of jobs and decision-making functions remained in Scotland.

Colin McLean of SVM Asset Management also said there was no reason why HBOS should not be allowed to go it alone. "By itself, the HBOS balance sheet capital ratios are a bit better than Lloyds's. There are a mixture of problems at each of the banks and merger itself does not solve them."

Malcolm Bruce, the MP for Gordon, has written to the Chancellor, calling for the merger to be reviewed in light of the bailout package and for the UK Government to consider "maintaining two separate banks" on the grounds of competition.

However, Shane O'Riordan, a spokesman for HBOS, made clear: "The fact is that the capital injection is entirely conditional on the deal with Lloyds-TSB being completed: no deal; no capital injection."

Remarks made in Edinburgh by Hector Sants, chief executive of the FSA, were seized on by Alex Neil, the SNP MSP, as proving the merger or effective takeover of HBOS by Lloyds TSB was "unnecessary".

Mr Sants made clear that the City watchdog was "content" with the amount of capital being raised by HBOS but that it was the general tripartite view - also involving the Treasury and the Bank of England - that it was in the "interests of financial stability for the merger to go through". Some £11.5bn is being raised on the HBOS side of the deal.

Last night, Mr Neil noted how Mr Sants had said in a reply to a question from leading businessman Jim Spowart that he "is content that HBOS has sufficient capital to operate as an independent bank". This, insisted the Nationalist MSP "blows the case for a merger between HBOS and Lloyds TSB out of the water".

He added: "Gordon Brown and Alistair Darling, who are forcing this merger on HBOS, need to go back to the drawing board. If this merger goes ahead, it will result in up to 40,000 job losses and create an unacceptable monopoly.

"Many of these job losses will be in Alistair Darling's own constituency, Edinburgh South. It will be political suicide for him to proceed with such an ill thought-out merger. Every effort should now be made by people in Scotland to stop this merger going ahead," he added.

Last night, a spokesman for First Minister Alex Salmond told The Herald that questions still remained about the merger but that it was the "only option on the table" and so it was the Scottish Government's responsibility to ensure the maximum number of jobs and decision-making functions remained in Scotland.

Colin McLean of SVM Asset Management also said there was no reason why HBOS should not be allowed to go it alone. "By itself, the HBOS balance sheet capital ratios are a bit better than Lloyds's. There are a mixture of problems at each of the banks and merger itself does not solve them."

Malcolm Bruce, the MP for Gordon, has written to the Chancellor, calling for the merger to be reviewed in light of the bailout package and for the UK Government to consider "maintaining two separate banks" on the grounds of competition.

However, Shane O'Riordan, a spokesman for HBOS, made clear: "The fact is that the capital injection is entirely conditional on the deal with Lloyds-TSB being completed: no deal; no capital injection."