British bailout: banks asked to freeze executive bonuses (Third Lead)October 13th, 2008 - 11:53 pm ICT by IANS
London, Oct 13 (IANS) The British government Monday poured a massive 37 billion pounds ($65 billion) into three of the country’s biggest banks and wrested guarantees of a freeze on executive bonuses.In a move that was described as the biggest shakeup of British banking, leading to the effective nationalisation of one of them, the Royal Bank of Scotland (RBS), the Halifax Bank of Scotland (HBOS) and Lloyds TSB were expected to submit to strict new government regulations.
The banks were also expected to restart lending to small businesses and individuals in a bid to stimulate the flow of credit through the nation’s banking system once again.
“In extraordinary times, with financial markets ceasing to work, the government cannot just leave people on their own to be buffeted about,” said Prime Minister Gordon Brown.
“For savers, for small businesses, and for homeowners, we must in an uncertain and unstable world be the rock of stability on which the British people can depend.”
Under the deal, RBS is to raise 20 billion pounds, while HBOS and Lloyds TSB will raise 17 billion pounds. However, Barclays said it planned to raise 6.5 billion pounds without government support.
RBS chief executive Sir Fred Goodwin is to step down, to be followed by its chairman Sir Tom McKillop in April next year.
Taxpayers will own 60 percent of RBS and 40 percent of a merged HBOS and Lloyds TSB as a result of the deal. McKillop said the 20 billion pounds of new funds will make RBS “one of the best capitalised banks in the world”.
Finance Minister Alistair Darling said there would be three government-appointed directors on the RBS board and two on the Lloyds TSB board.
“There will be restrictions on what happens on boardroom pay and we are also getting guarantees in relation to increased lending to businesses, as well as to mortgages too,” Darling said.
“This comes with strings attached in relation to bonuses. They won’t be paid this year,” he said.