UK Gov increases bank stake
(10 March 2009 – UK) The UK Government has increased its stake in troubled banking giant Lloyds, as it struggles with losses from recently acquired HBOS.
The move is the second big bailout by the British Government, after it also bought a stake in RBS. HSBC and Barclays are left as the two banking giants outside of Government control.
The British Government will increase its ownership of the bank from 43 percent to 65 percent as well as insuring toxic assets.
Under the agreement, Lloyds will place £260 billion of assets into the Government’s Asset Protection Scheme, focusing on those assets where there is the greatest degree of uncertainty about their future performance.
For this, Lloyds will pay a participation fee of £15.6 billion to the UK Treasury in capital.
The agreement will mean that in the event of a loss, Lloyds will bear a first loss amount of up to £25 billion. Only after this will the Government step in.
In return Lloyds will make additional lending commitments totalling £3 billion of mortgage lending and £11 billion of business lending over the next 12 months.
For the subsequent 12 months, a similar lending commitment is in place, but will ultimately reflect economic circumstances at the time.
Treasury minister Stephen Timms told BBC television that the key is that by ending the uncertainty on the valuation on Lloyds’ assets, it's able to commit to additional lending.
He added that step by step, the Government is filling the gap created by the withdrawal of non-UK banks from the UK market, a lending shortage he valued at around £100 billion.
The British Government will increase its ownership of the bank from 43 percent to 65 percent as well as insuring toxic assets.
Under the agreement, Lloyds will place £260 billion of assets into the Government’s Asset Protection Scheme, focusing on those assets where there is the greatest degree of uncertainty about their future performance.
For this, Lloyds will pay a participation fee of £15.6 billion to the UK Treasury in capital.
The agreement will mean that in the event of a loss, Lloyds will bear a first loss amount of up to £25 billion. Only after this will the Government step in.
In return Lloyds will make additional lending commitments totalling £3 billion of mortgage lending and £11 billion of business lending over the next 12 months.
For the subsequent 12 months, a similar lending commitment is in place, but will ultimately reflect economic circumstances at the time.
Treasury minister Stephen Timms told BBC television that the key is that by ending the uncertainty on the valuation on Lloyds’ assets, it's able to commit to additional lending.
He added that step by step, the Government is filling the gap created by the withdrawal of non-UK banks from the UK market, a lending shortage he valued at around £100 billion.
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