UK Gov takes control of banks
(15 October 2008 – UK) The British Government has taken a dramatic step and confirmed that it will take a controlling interest in two of the biggest British banks.
The government is making capital investments in RBS and, upon successful merger, HBOS and Lloyds TSB, totalling £37 billion (A$97.6 billion).
The decision is intended to put the banks back in a sound position and support the long term strength of the banking sector and wider economy, depositors, businesses and borrowers.
By providing banks with increased levels of capital - through the purchase of shares - and by introducing a guarantee scheme to encourage lending between banks, these actions are intended to restore confidence in the banking system and ensure banks are more willing to lend to individuals and businesses.
Following the completion of these capital investments, each of the above institutions will have a tier 1 capital ratio in excess of 9 percent, well above international minimum standards and at a level that should put them on a strong footing for the future.
Royal Bank of Scotland said in a statement it will boost its capital by £20 billion, including the British government's taking £5 billion in preference shares and £15 billion underwritten by the government.
The £15billion of funding will be via a sale of shares to existing shareholders, with the government covering the amount not taken up.
Stephen Hester will be the new chief executive officer of Royal Bank of Scotland Group, replacing Fred Goodwin, who resigned. Hester, who was CEO of British Land, was already an RBS board member.
The decision is intended to put the banks back in a sound position and support the long term strength of the banking sector and wider economy, depositors, businesses and borrowers.
By providing banks with increased levels of capital - through the purchase of shares - and by introducing a guarantee scheme to encourage lending between banks, these actions are intended to restore confidence in the banking system and ensure banks are more willing to lend to individuals and businesses.
Following the completion of these capital investments, each of the above institutions will have a tier 1 capital ratio in excess of 9 percent, well above international minimum standards and at a level that should put them on a strong footing for the future.
Royal Bank of Scotland said in a statement it will boost its capital by £20 billion, including the British government's taking £5 billion in preference shares and £15 billion underwritten by the government.
The £15billion of funding will be via a sale of shares to existing shareholders, with the government covering the amount not taken up.
Stephen Hester will be the new chief executive officer of Royal Bank of Scotland Group, replacing Fred Goodwin, who resigned. Hester, who was CEO of British Land, was already an RBS board member.
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