With press attention resolutely focused on luxury yachts, Russian aluminium oligarchs, the Conservative shadow chancellor and conversations about political donations, the new Business Minister found time to declare yesterday that the government's recapitalisation of Lloyds TSB and HBOS depends on the Lloyds take-over proceeding apace.

"The recapitalisation is predicated", he declared, "on the merger going ahead."

This is the clearest statement yet from the government on the highly controversial question as to whether the capital positions of the two banks were considered separately for the purposes of the government rescue plan or were treated together.

Lord Mandelson added for good measure that he had "heard nothing that suggests the merger wouldn't go ahead."

Clearly he has not been reading The Scotsman for the past two weeks - or the public position adopted by Scotland's First Minister Alex Sal

And it's odd, to put it mildly, that a takeover requiring the suspension of EU competition rules in order for it to take place should be embraced so unquestioningly by the former EU Trade Commissioner.

Is Lord Mandelson correct in his understanding? Or is he blindly continuing to support a takeover plan that has in fact been superseded by the massive bank rescue announced just over a week ago?

Hector Sants, chief executive of the Financial Services Authority, gave the clear impression when questioned by the press in Edinburgh last week, that all banks now had enough capital - suggesting the Scottish institution could continue without the controversial Lloyds TSB takeover. He said the FSA was responsible for ensuring it was content with the amount of capital the banks held. And he said it was obvious the authority was "content with the capital being raised by HBOS".

Eric Daniels, chief executive of Lloyds TSB, told staff in a an internal business TV broadcast earlier this week that "we're required, as Lloyds TSB, and then as the combined entity Lloyds TSB and HBOS, to take capital." The clear inference is that if Lloyds TSB was assessed separately, so, too, must HBOS have been.

Alex Potter, analyst at stockbroker Collins Stewart, said he could not understand the Government's persistence in pushing for the takeover when the available liquidity package would do more to help the banks.

"It seems to show the weak grip that Lord Mandelson appears to have on ways to stabilise the financial system.

"If the funding had been granted a few weeks earlier, there would have been no need to create such an anti-competitive animal."

Interestingly, in a sign that some UK lenders are preparing to take advantage of the UK Government's move to guarantee certain types of bank debt, ratings agencies Standard & Poor's and Fitch Ratings both assigned ratings to a new £20 billion debt programme set up by Bank of Scotland. S&P is rating the Euro-denominated medium-term note, commercial paper, and certificate of deposit programme AAA/A-1+, in line with the sovereign rating of the UK, which has guaranteed timely payment on debt issued under the programme. Fitch assigned long-term triple-A and short-term F1+ ratings to the programme, also in line with its sovereign ratings for the UK.

This would suggest that HBOS is enjoying the benefit of government guarantees of its debt paper without the need for a takeover by Lloyds TSB.

Lord Mandelson's blunt statement is also cavalier over shareholder democracy - this takeover - once a formal document is put on the table in ten days' time - is subject to the approval both of Lloyds TSB and HBOS shareholders. And the resolution will require a 75 per cent majority in both cases. HBOS has 1.2 million shareholders. And Lloyds TSB has 800,000 - then bank has traditionally been a big dividend payer and this is why the shares have such a large following. How ironic it would be if Lloyds TSB investors voted the takeover down because of the proposed ban on dividend payments for five years.

Lord Mandelson may think it is all a done deal. It is far from being so.