LONDON: Britain will launch its biggest retail bank rescue on Monday when
the four largest, HBOS, Royal Bank of Scotland, Lloyds TSB and Barclays, ask
for a combined 35 billion pound ($60.5 billion) lifeline, the Sunday Times
reported.
The unprecedented move would make the government the biggest shareholder
in at least two banks, HBOS and Royal Bank of Scotland, the newspaper said on
its website. It did not give a named source for its information.
No government officials or representatives from the four banks were
immediately available to comment on the report.
British Finance Minister Alistair Darling, attending a G7 finance
ministers' meeting in Washington, said on Saturday the government was to give
more details early this week about its already announced 400 billion pound
banking rescue plan.
The Sunday Times said the scale of the fund-raising could lead to trading
at the London Stock Exchange being suspended to give the market time to digest
the impact.
The newspaper said Royal Bank of Scotland, which has seen its market
value fall to below 12 billion pounds, was to ask ministers to underwrite a 15
billion pound cash call.
It said HBOS, Britain's biggest provider of mortgages, was seeking up to
10 billion pounds. Lloyds TSB, in the process of acquiring HBOS in a rescue
merger, wanted 7 billion pounds, and Barclays needed 3 billion pounds, the
newspaper said.
One consequence of the fund raising might be that Lloyds TSB could
renegotiate the terms of the HBOS takeover, although both sides were still keen
for the merger to go ahead, said the newspaper.
A government source told Reuters on Saturday the British government could
end up with seats on the boards of major retail banks.
The Sunday Times said the bank rescue could leave the government owning
70 percent of HBOS and 50 percent of Royal Bank of Scotland, and as a result it
could take board seats at both banks and exercise control over future dividend
payments.
"This is the biggest risk of the UK's balance sheet ever undertaken. No
one knows the extent of the toxic assets these banks are exposed to," an
economist, who declined to be named, was quoted as saying in the newspaper.
Crisis talks were taking place this weekend between the Treasury, the
Financial Services Authority, the Bank of England and heads of the four banks,
the Sunday Times said.
It said the banks were likely to have to own up to future losses from
their exposure to subprime mortgages and other financial instruments.
Last week, Britain unveiled a multi-billion pound package aimed at
stabilising banks and getting them lending again.
The package of measures included a 50 billion pound cash injection,
guaranteeing interbank lending by 250 billion sterling to help unfreeze
wholesale markets, and extending a Bank of England scheme that swaps banks'
risky assets for government debt to provide 200 billion pound of cash to the
system.
http://economictimes.indiatimes.com/articleshow/3585909.cms
He who puts up with insult invites injury
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