HBOS may return with its own bid for Abbey National

At a meeting between the bank's chairman Emilio Botin and Abbey staff union representatives, BSCH promised to safeguard staff pension rights.

It also said it would offer 100 BSCH shares each to Abbey employees if its takeover was successful.

Last month, BSCH made an �8bn ($14.6bn) takeover offer for Abbey.

Abbey currently employs around 26,000 people and BSCH wants 450m euros of cost savings by the third year after the deal is completed.

Meanwhile, banking group HBOS is writing to the European Commission over Banco Santander Central Hispano's (BSCH) proposed takeover of Abbey National.

Complaint

HBOS is complaining about the fact that BSCH is tied to rival UK bank Royal Bank of Scotland (RBS) through a cross ownership of each other's shares.

HBOS wants BSCH and RBS to end their tie-up, saying it is unacceptable.

In addition, HBOS has said it is considering making its own bid for Abbey National, which also owns Scottish Mutual and Scottish Provident.

"We will be writing to the commission to express our concern about the cross shareholdings between RBS and SCH," a HBOS spokesman said.

Boardroom arrangements

HBOS is calling for Santander and Royal Bank of Scotland to cease their arrangement originally agreed in 1988 - SCH owns about 5% of RBS' stock, while RBS has a 2.8% stake in SCH.

It also wants their directors to no longer be allowed to sit on one another's boards. Currently RBS chairman George Matthewson sits on the Spanish bank's board.

"In the event that SCH acquires Abbey National we believe it would be unhealthy for board directors from both banks to sit on each other's boards.

"At a very minimum we believe that the cross-director representation should cease."

HBOS also said it wants to ensure there has been no written or verbal agreement between SCH and RBS, which would allow the Spanish bank to outsource various Abbey National back-office functions to RBS on favourable terms.

The EU is due to conclude its preliminary investigation into BSCH's proposed �8bn takeover of Abbey on 17 September.