MPs to debate Brown's bail-out plan

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MPs will discuss the Treasury's Banking Bill the day after a £37 billion taxpayer lifeline was thrown to three of the UK's biggest banks in a bid to end the sector's turmoil.

In what Gordon Brown called an "unprecedented but essential" agreement, the Government announced it would take "significant" stakes in Royal Bank of Scotland, Lloyds TSB and Britain's biggest mortgage lender, Halifax Bank of Scotland.

The high-stakes bail-out, approved by Brussels on Monday night, restored some confidence in London shares with the FTSE 100 Index closing more than 8% higher.

But shares in the three banks fell heavily, reflecting the fact that existing investors will see their holdings diluted and dividends curbed. HBOS dived 28%, Lloyds 14% and RBS closed 8% lower.

The state investment involves tough conditions, including curbs on management bonuses and a pledge to ensure the availability and supply of lending to small businesses and homeowners.

The deal quickly claimed the UK's first major scalps of the banking crisis with the chairmen and chief executives of RBS and HBOS announcing they would be standing down.

Under the plan, £5 billion will be injected into Royal Bank of Scotland by the Treasury, with a £15 billion share issue by the bank also guaranteed by the Government.

Lloyds TSB and its proposed new partner HBOS will receive up to £17 billion of emergency funding, while the price Lloyds TSB is paying for its rival is also being lowered.

The Government could theoretically end up owning about 60% of RBS and 43% of the combined Lloyds TSB-HBOS entity, depending on how many other investors choose to buy the banks' new shares.