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UK banks' £37bn bail-out unveiled UK banks' £37bn bail-out unveiled
(30 minutes later)
The government is to inject up to £37bn of taxpayer cash into Royal Bank of Scotland (RBS) Lloyds TSB and HBOS. The government is to inject up to £37bn of taxpayer cash into Royal Bank of Scotland (RBS), Lloyds TSB and HBOS.
RBS is to raise £20bn with a further £17bn to be put into HBOS and Lloyds TSB. Barclays intends to raise £6.5bn without government help.RBS is to raise £20bn with a further £17bn to be put into HBOS and Lloyds TSB. Barclays intends to raise £6.5bn without government help.
Taxpayers will own about 60% of RBS and 40% of the merged Lloyds TSB and HBOS.Taxpayers will own about 60% of RBS and 40% of the merged Lloyds TSB and HBOS.
The chief executives and chairmen of both RBS and HBOS are to resign, after their banks were forced to ask for the bail-out money.The chief executives and chairmen of both RBS and HBOS are to resign, after their banks were forced to ask for the bail-out money.
The Treasury cash forms part of the government rescue plan announced last week.The Treasury cash forms part of the government rescue plan announced last week.
It's not wrong to call it nationalisation but it's very different from Northern Rock. Shareholders will continue to own a big chunk of the banks Robert PestonBBC Business Editor Read Robert's blogTreasury's statement in fullSend us your experiences It's not wrong to call it nationalisation but it's very different from Northern Rock. Shareholders will continue to own a big chunk of the banks Robert PestonBBC Business Editor Read Robert's blogTreasury's statement in fullSend us your experiences
BBC business editor Robert Peston said the announcement would "count as perhaps the most extraordinary day in British banking history" and was "an absolute humiliation" for the banks.BBC business editor Robert Peston said the announcement would "count as perhaps the most extraordinary day in British banking history" and was "an absolute humiliation" for the banks.
Management shake-upManagement shake-up
As part of the banks' announcements:
  • Lloyds and HBOS said they had renegotiated their merger, reducing the number of Lloyds TSB shares that HBOS shareholders will receive.
  • RBS said chief executive Fred Goodwin was quitting with immediate effect - without a severance pay-off. He will be replaced by British Land boss Stephen Hester. RBS chairman Tom McKillop is to retire.
  • HBOS chief executive Andy Hornby and chairman Lord Dennis Stevenson said they would stand down from their posts.
  • RBS and Lloyds TSB/HBOS will return mortgage and small-business lending to 2007 levels, which is much more than they are currently lending.
As part of the banks' announcements:
  • Lloyds and HBOS said they had renegotiated their merger, reducing the number of Lloyds TSB shares that HBOS shareholders will receive.
  • RBS said chief executive Fred Goodwin was quitting with immediate effect - without a severance pay-off. He will be replaced by British Land boss Stephen Hester. RBS chairman Tom McKillop is to retire.
  • HBOS chief executive Andy Hornby and chairman Lord Dennis Stevenson said they would stand down from their posts.
  • RBS and Lloyds TSB/HBOS will return mortgage and small-business lending to 2007 levels, which is much more than they are currently lending.
Other developments included:
  • Major central banks saying they would offer financial institutions an unlimited amount of short-term dollar loans to help stem the crisis.
  • London's FTSE 100 index rising by about 6% as investors reacted to the news, with some banks among the winners.
Other developments included:
  • Major central banks saying they would offer financial institutions an unlimited amount of short-term dollar loans to help stem the crisis.
  • London's FTSE 100 index rising by about 6% as investors reacted to the news, with some banks among the winners.
'Not permanent''Not permanent'
Prime Minister Gordon Brown said the bail-out was: "unprecedented but essential for all of us", and would thaw frozen money markets.Prime Minister Gordon Brown said the bail-out was: "unprecedented but essential for all of us", and would thaw frozen money markets.
BANKS AND THEIR BAIL-OUTS RBS - £20bn (government takes 60% stake)Lloyds TSB/HBOS - £17bn* (government takes 40% stake) *dependent on merger being completed Check UK bank sharesBANKS AND THEIR BAIL-OUTS RBS - £20bn (government takes 60% stake)Lloyds TSB/HBOS - £17bn* (government takes 40% stake) *dependent on merger being completed Check UK bank shares
The investments were assets and, "not just money being pumped in", he added, saying the government was: "not a permanent investor in UK banks". The investments were assets and, "not just money being pumped in", he added, saying the government was "not a permanent investor in UK banks".
"Its intention, over time, is to dispose of all the investments it is making as part of this scheme in an orderly way," Mr Brown said."Its intention, over time, is to dispose of all the investments it is making as part of this scheme in an orderly way," Mr Brown said.
As a condition of the deal, the government has insisted that senior directors should get no cash bonuses this year, with future bonuses to be paid in the form of shares - a move aimed at encouraging management to take a more long-term approach.As a condition of the deal, the government has insisted that senior directors should get no cash bonuses this year, with future bonuses to be paid in the form of shares - a move aimed at encouraging management to take a more long-term approach.
Dividend cancelledDividend cancelled
The government will buy £5bn of preference shares in RBS and another £15bn of ordinary shares if, as many expect, the bank is unable to find willing private investors.The government will buy £5bn of preference shares in RBS and another £15bn of ordinary shares if, as many expect, the bank is unable to find willing private investors.
"It's immensely regretful we're coming to shareholders to raise funds again, it's something we feel bad about," said RBS chairman Sir Tom McKillop."It's immensely regretful we're coming to shareholders to raise funds again, it's something we feel bad about," said RBS chairman Sir Tom McKillop.
HBOS will raise £11.5bn from taxpayers, made up of £8.5bn in ordinary shares and £3bn in preference shares, while Lloyds TSB is to get £5.5bn.HBOS will raise £11.5bn from taxpayers, made up of £8.5bn in ordinary shares and £3bn in preference shares, while Lloyds TSB is to get £5.5bn.
The money is conditional on the merger of the banks going through.The money is conditional on the merger of the banks going through.
Lloyds TSB and HBOS said the deal was still on, but that the terms had been renegotiated.Lloyds TSB and HBOS said the deal was still on, but that the terms had been renegotiated.
A £12.2bn deal was agreed last month, but the value of HBOS shares has since plunged and the extent of the recapitalisation has highlighted its weakness.A £12.2bn deal was agreed last month, but the value of HBOS shares has since plunged and the extent of the recapitalisation has highlighted its weakness.
Under the revised deal, HBOS shareholders will get 0.605 Lloyds TSB shares for every HBOS share they hold. Under the original deal they would have received 0.83 Lloyds TSB shares.Under the revised deal, HBOS shareholders will get 0.605 Lloyds TSB shares for every HBOS share they hold. Under the original deal they would have received 0.83 Lloyds TSB shares.
'No Rock''No Rock'
Barclays has said it is to raise £6.5bn of new capital. The bank is to raise the money from private investors, rather than going to the government.Barclays has said it is to raise £6.5bn of new capital. The bank is to raise the money from private investors, rather than going to the government.
Barclays also said it would scrap its final dividend payout for 2008, saving it £2bn.Barclays also said it would scrap its final dividend payout for 2008, saving it £2bn.
Our business editor said it was not wrong to describe the part-ownership of RBS, Lloyds TSB and HBOS as nationalisation, but the situation was very different from Northern Rock and Bradford and Bingley, which had seen private investors lose their holding.Our business editor said it was not wrong to describe the part-ownership of RBS, Lloyds TSB and HBOS as nationalisation, but the situation was very different from Northern Rock and Bradford and Bingley, which had seen private investors lose their holding.
"Shareholders will continue to own a big chunk of the banks," he said."Shareholders will continue to own a big chunk of the banks," he said.
Do you think this move will help you? Are you looking to get a mortgage or to re-mortgage? Are you about to retire? You can send us your experiences using the form below:Do you think this move will help you? Are you looking to get a mortgage or to re-mortgage? Are you about to retire? You can send us your experiences using the form below:
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