Government props up RBS and Lloyds with £39bn

by Gill Montia

Story link: Government props up RBS and Lloyds with £39bn

The Government has announced that it intends to increase taxpayer support to Royal Bank of Scotland (RBS) and Lloyds Banking Group by £33.5 billion and £5.7 billion respectively.

Chancellor of the Exchequer Alistair Darling has also reassured Britons that the break up of both banks, as demanded by the EU Competition Commission, is in the best interests of the taxpayer, the banks themselves and the UK economy.

The latest bailouts total £39.2 billion, which when added to last autumn’s rescue package increases the level of government support to both banks to around £76 billion.

Lloyds, which is currently 43.5% state owned, has confirmed that it intends to raise £21 billion (partly through a £13.5 billion right issue) and will stay out of the Treasury’s Asset Protection Scheme.

The government will however, take up £5.7 billion of shares from the rights issue to maintain its 43.5% holding.

RBS looks set to sell 318 branches across the UK, including its NatWest brand in Scotland.

The group’s insurance business, Global Merchant Services and RBS Sempra Commodities units will also be auctioned off, as will its card payment business.

Lloyds will sell at least 600 branches: expected disposals include Lloyds TSB in Scotland, the group’s Cheltenham & Gloucester mortgage lending business, and Intelligent Finance.

As previously announced, large established UK financial institutions will be excluded from the bidding.

According to a BBC report, insurers Allianz, Generali and Zurich could show an interest, together with Tesco and Virgin Money, both already widely tipped as bidders.