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British government outlines 37 billion pound bank rescue - Update


Published :
Mon, 13 Oct 2008 04:41
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London - The British government Monday gave details of its bank recapitalization plan which foresees pumping 37 billion pounds (65 billion dollars) into three leading banks. The Royal Bank of Scotland (RBS) will receive 20 billion pounds (35 billion dollars) of new capital, giving the government a 60-per- cent share in the Edinburgh-based bank.

The chief executive of RBS, Fred Goodwin, has agreed to stand down as part of the deal, after the bank's share fell to 1.71 pence at the end of last week.

RBS will raise 5 billion pounds directly under the government's bail-out plan, while 15 billion pounds will be raised through issuing new shares.

It was also announced that Lloyds TSB, which is to raise its capital by 5.5 billion pounds, is to renegotiate its agreed takeover deal with Halifax Bank of Scotland (HBOS).

Lloyds said it would offer 0.605 pence per HBOS share, as opposed to the 0.83 pence agreed when the takeover was agreed last month.

HBOS is to raise 11.3 billion pounds, giving the government a 40- per-cent stake.

Barclays said it would not draw on the government funds and raise 6.5 billion pounds from shareholders.

Banks and Treasury officials worked through the night to hammer out details of the government aid to banks following the major bail- out package agreed last week.


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