British government outlines $65 bn bank rescue (Lead)

October 13th, 2008 - 3:10 pm ICT by IANS  

London, Oct 13 (DPA) The British government Monday gave details of its bank recapitalization plan which foresees pumping 37 billion pounds ($65 billion) into three leading banks.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 five 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.

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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