London’s measures are significant: Government (Second lead)

October 13th, 2008 - 3:52 pm ICT by IANS  

London, Oct 13 (DPA) The British government believes that the “decisive action” taken to stabilize leading banks with 37 billion pounds ($65 billion) of new capital will help it to “get through” the current financial turmoil.Chancellor of the Exchequer Alistair Darling said Monday it was important that other countries followed the British example of injecting cash into ailing banks.

“The steps we have taken are pretty significant,” Darling told the BBC. “We have taken a pretty significant step to take us through this.”

However, he insisted that the government did “not want to run banks. Our sole aim is to strengthen and rebuild British banks.”

Initial stock market reaction to the move, agreed in principle last week, was possible in early trading in London Monday.

The Royal Bank of Scotland (RBS) will receive 20 billion pounds ($35 billion) of new capital, giving the government a 60-percent 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-percent stake once it has merged with Lloyds TSB.

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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