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UK government bails out RBS, HBOS and Lloyds TSB

Latest update : 2008-10-13

Britain's government has announced investments of up to 37 billion pounds (46.6 billion euros) in the banks RBS, HBOS and Lloyds TSB.

LONDON - Britain could pump up to 45 billion pounds ($78 billion)
into troubled major banks and take big stakes as part of a recapitalisation
due to be unveiled on Monday, sources familiarwith the situation said.

Royal Bank of Scotland, HBOS and Lloyds TSB were in line to
receive the billions of pounds from investors and taxpayers in a
bid to rescue them from the impact of the global credit crisis,
said the sources, declining to be named.

Barclays <BARC.L> said in a statement on Monday it would
boost its capital by more than 6.5 billion pounds, but expected
to do so without government help because its finances were
strong enough.

The UK rescue plan could result in the government becoming
the biggest shareholder, and even a majority investor, in Royal
Bank of Scotland and HBOS -- effectively partly nationalising
two of Britain's biggest banks.

Talks among the banks, government officials and regulators
were due to go on through the early hours of Monday to determine
how much each would need from the 50 billion pounds offered by
the government last week to offset the global credit crunch.

An announcement was expected before markets open on Monday,
but details were still being fine-tuned, said the sources. The
Treasury said its statement may be slightly delayed, but should
be made before 0700 GMT.

Royal Bank of Scotland Group Plc <RBS.L> may take over 15
billion pounds, HBOS <HBOS.L> over 10 billion, and Lloyds TSB
<LLOY.L> about 5 billion, according to industry sources and
media reports.

The banks are expected to try and sell shares to existing
investors, backed by the government, which would buy the shares
not taken by investors.



The government could take seats on the boards of banks, a
government source said on Saturday.

"I believe the action we have taken in Britain will rebuild
trust," Prime Minister Gordon Brown told the BBC.

The Financial Times newspaper said Royal Bank of Scotland
was expected to place shares with the government at 65 pence a
share, compared to a closing price on Friday of 71.7 pence.

Royal Bank of Scotland's chief executive Fred Goodwin was
widely expected to resign as part of the fund-raising deal and
to be replaced by Stephen Hester, chief executive for British
Land <BLND.L>.

In addition to potentially taking ordinary shares, the
government is expected to provide capital in return for
preference shares, which could pay an annual dividend of about
10 percent but typically do not have voting rights.

The Financial Times said Royal Bank of Scotland could also
raise 5 billion pounds in preference shares, while HBOS may take
around 3 billion.

Lloyds' rescue takeover of HBOS, announced last month and
encouraged by the British government, was said in a number of
media reports to be close to collapse or re-negotiation,
although HBOS said on Sunday it "remains in place and on track".

No government officials were immediately available for
comment on the progress of the talks. The four banks all
declined to comment on the negotiations.

The Daily Telegraph newspaper said banking shares might be
suspended in London to give investors time to consider the

A spokesman for the London Stock Exchange told Reuters on
Sunday: "My information is that the market will open on Monday."

Date created : 2008-10-13