The proposed £12.2 billion takeover of Halifax Bank of Scotland (HBOS) by rival Lloyds TSB will create a super bank covering about a third of the UK's mortgage and savings markets.

Details of the deal, which is subject to shareholder agreement as well as ratification from the Financial Services Authority (FSA), are now emerging.

HBOS chairman Dennis Stevenson said: "This is the right transaction for HBOS and its shareholders."

Currently, HBOS has 75,000 staff while Lloyds TSB employ about 70,000. Analysts have estimated that as many as 40,000 jobs could be lost from the banks' combined workforce.

The deal agreement said: "Significant cost savings can be made by combining the networks and back offices of Lloyds TSB and HBOS."

It added that the takeover would result in "cost synergies" of £1 billion by 2011, or about 10% of the combined cost base.

There will be "elimination of branch duplication" in the retail arm. HBOS has 1,100 branches, and Lloyds TSB 1,900, including 160 of its Cheltenham & Gloucester arm.

There will also be "consolidation of head office functions", including human resources, finance and legal departments.

The deal comes after a run on HBOS shares this week which has seen the group's share price fall as much as 70%.

It is expected the Government will waive competition rules to get the transaction through, and reportedly follows talks between Lloyds TSB chairman Sir Victor Blank and Prime Minister Gordon Brown.

Business Secretary John Hutton confirmed the Government will push through the merger on public interest grounds to "ensure the stability of the UK financial system".

An order allowing this will be laid before Parliament when the House returns after the summer recess.

Currently public interest grounds cover only plurality of media ownership and national security. Mr Hutton's decision follows advice from the UK tripartite authorities - HM Treasury, Bank of England and the Financial Services Authority.

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