HBOS's shares fell 12 per cent today and have lost more than half their value in the past two weeks - raising concerns over whether the deal will have to be repriced to gain the approval of Lloyds TSB shareholders.

Meanwhile fears over last night's derailing of the 700 billion US dollar (£388bn) banking bail-out for US financial institutions also weighed on bank stocks.

Lloyds has offered 0.833 of its own shares - currently equivalent to 187p - for every HBOS share in a deal valuing the lender at £9.8 billion.

But HBOS shares were trading 33 per cent below this at around 125p today, raising questions over whether the takeover would be waved through as it currently stands.

Alex Potter, Collins Stewart banking analyst, said: "The market is implying that (the deal) does not happen."

Numis Securities analyst Gurgit Kambo added: "There are clearly some concerns. The uncertainty is if shareholders vote against it, then it won't go through."

An HBOS spokesman shrugged off the concerns today. He said: "This is the right deal for HBOS shareholders. We are already working on the integration planning process and it is full steam ahead as far as we are concerned.

"Share price volatility in bank stocks is part of the menu at the moment. These are not normal times."

Despite last night's rejection, there were hopes that a bail-out could yet be agreed by US politicians in Congress, possibly on Thursday or Friday.

This would help restore confidence in markets stunned by the latest twists of the global banking crisis - which has seen Bradford & Bingley nationalised this week and a host of other players given state-bailouts or taken over in Europe and the US.

HBOS sought a takeover by Lloyds TSB to bring stability to the business after a run on its shares in the wake of the collapse of US investment bank Lehman Brothers, and concerns over higher funding costs in frozen inter-bank markets.

If the deal goes ahead, it will create a "mega-bank" with nearly a third of the UK mortgage market and more than £300 billion of deposits.

It will also have around 3,000 branches, leapfrogging industry titan Royal Bank of Scotland's 2,300 sites and dwarfing HSBC, which has around half.