BRITISH BAILOUT:BRITAIN WAS last night preparing to pump more than £37 billion (€47 billion) into four of the country's largest banks in a broad-based recapitalisation that could see the UK government end up with controlling stakes in Royal Bank of Scotland and HBOS, which both have banking subsidiaries in Ireland.
Top executives from RBS, HBOS, Lloyds TSB and Barclays were last night locked in talks with officials in a frantic attempt to hammer out details of the capital increase before the markets reopen today.
Under the plans being discussed, RBS, which owns Ulster Bank and First Active in Ireland, is likely to raise as much as £20 billion in fresh capital.
Of this, £15 billion would come in the form of a placing of ordinary shares with the government, with the remainder in the form of preferred shares. Existing RBS shareholders would be given an opportunity to buy the shares, but if they did not the government is expected to be left with a controlling stake in the bank.
Sir Fred Goodwin, RBS's chief executive, is expected to step down, to be replaced by Stephen Hester, the former banker who is chief executive of British Land. Mr Goodwin would become British banking's biggest casualty of the credit crisis.
HBOS, which operates here under the Halifax and Bank of Scotland (Ireland) brands, is expected to raise about £12 billion, of which £9 billion would be in the form of ordinary shares, while Lloyds TSB - with which it is due to merge - is expected to raise a total of about £5 billion.
The capital increase and the prospect of a large government shareholding may also prompt Lloyds to rethink the terms of its planned takeover of HBOS, announced last month.
Barclays executives were last night still negotiating with government officials but the bank is expected to raise several billion pounds. Last night executives and officials were debating how many board seats the British government would demand if it ended up with a large shareholding in the banks.
The fundraising talks come just days after the British government unveiled a £400 billion package designed to recapitalise the banks and unfreeze interbank lending markets in an effort to avert a severe recession.
However, the recapitalisation envisaged in the earlier scheme would not have given the government preferred shares with no voting rights. The speed of the latest discussions has surprised some bank executives, who believed they had been given until the end of the year to finalise their plans. - ( Financial Times)
