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Plans to merger Lloyds TSB and HBOS could be scuppered by shareholders.

Roger Lawson, of the UK Shareholders Association (UKSA), explained a number of its members had already stated their discontent over the deal and if institutional investors – holding the lion's shares of stock – chose to stand against it, the merger could be on the rocks.

"There is still a great deal the banks need to explain. A few days ago HBOS was saying everything was fine," he said.

"Lloyds TSB is not paying an enormous amount. The offer is low, but not very low."

Mr Lawson also urged shareholders not to accept the first offer on the table, although the UKSA is yet to give its advice.

He added just because the share price was depressed is no reason to accept a ridiculously low offer.

He also responded to suggestions the government had moved quickly to pressure Lloyds TSB into buying HBOS – compared to its sluggish response to Northern Rock.

"I never criticised the government for standing back over Northern Rock, although they screwed up in the end."

He explained it was unclear whether the government was pushing too much, depending on how great a chance there was there would be no white knight to save HBOS.

"If there was no white knight, the bank would have had to do a Northern Rock, which would have been hard given its size.

"You can see why the government put pressure on HBOS to accept a deal."

He added that was why the government had offered to push aside competition rules.

However, he claims this was a mistake.

"Competition in the high street banking is less than it ever was. Customer churn is very low and there is little price competition, and now there will be even less."

Halifax, Alliance & Leicester and Northern Rock were among the only firms offering competition against the major players, he explained, but they are now gone.

"Who is left? Nobody. The likes of Royal Bank of Scotland, Barclays and HSBC will be rubbing their hands at the reduction in competition."