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Biggest bail-out ever for banks
Joe Murphy and Hugo Duncan03.11.09
The biggest bail-out yet of British banks was agreed today despite evidence that small firms are still being denied the credit they desperately need to survive the recession.
Royal Bank of Scotland and Lloyds will get up to £40 billion in a restructuring and aid package unveiled by the banks and the Treasury today.
Taxpayers could plough as much as £33.5 billion into RBS and £5.7 billion into Lloyds. The £39.2 billion total exposure exceeds the £37 billion offered just over a year ago in the emergency action to stop them collapsing at the height of the financial crisis.
Yet the City Minister, Lord Myners, was unable to say whether the pair of rescued banks were honouring their pledge to resume lending to struggling firms and families.
At a Treasury briefing on today's rescue, he said only: “I have no reason to believe Lloyds and RBS are any less supportive of small business
clients than Nationwide, HSBC or Barclays.
Remember, if we had not stepped in to support them, they would not be there to support small businesses.”
He said figures on lending would not be presented to Parliament before spring.
Lloyds and RBS agreed to a small restriction of bonuses to try to assuage public anger that huge amounts were being poured into the banks again just as the bonus culture was revived.
However, Stephen Alambritis, chief spokesman of the Federation of Small Businesses, said: “Small businesses are still struggling to get loans.
The banks are asking for an arm and a leg and the
process is tortuous and elongated.”
Shadow chancellor George Osborne said: “The Government is having to put another £39.2 billion of taxpayers' money into the banks. Yet still there is no guarantee that it will get credit flowing in the economy.”
Vince Cable, Liberal Democrat Treasury spokesman, added: “The banks want it all their own way. There must be no question of Lloyds and RBS running away from their lending agreements.
They owe their existence to the taxpayer. The Government must remember that.”
He dismissed the bonus agreements as “a sham” because executives would just postpone payout. Cash bonuses will only be allowed for staff earning less than £39,000 and capped at £2,000.
Higher paid executives will get bonuses in shares, with no limit. Executive directors will not be allowed to touch their shares until 2012, subject to a claw-back if deals turn sour.
Lloyds and RBS were also ordered to sell off branches and businesses to comply with European rules banning unfair state aid.
The public stake in RBS has grown from 70 per cent to 84.4 per cent, and is 43 per cent in Lloyds. Chancellor Alistair Darling said the exposure for taxpayers was much less than expected six months ago: “I believe what we have is better structured and a better deal for the taxpayer. It does represent a major step forward along what has been a very difficult road.”
Lord Myners attacked City institutions for “egging on” the risky banking that led to the meltdown from 2007, comparing them to restaurants that put up signs saying “property left at owners risk — management not responsible”.
Attacking investors such as pension funds and insurance giants, he said: “I would expect those institutional investors on behalf of their clients, who are us, to be much more challenging than they have been in the past.”
The cash crisis
September 2007 Run on Northern Rock leads to its nationalisation five months later
September 2008 Lloyds rescues crippled HBOS in $22 billion takeover
October 2008 Government bails out RBS and Lloyds/HBOS with £37 billion in return for stakes in both
Feb/March 2009 Both agree to pay the Government for an “insurance policy” to guarantee the value of bad assets, but at a high price
November 2009 Lloyds says it will raise £21 million from shareholders and leave the insurance scheme RBS and Lloyds forced by the
European Commission to sell businesses as payback for state aid Taxpayer pumps another
£39.2 billion into the two banks
Reader views (32)
What all this means is that Gordon,Tony,and New Labour got it completely wrong in every conceivable way.Dont blame the world .The banks and the financial system in the UK is BANKRUPT they are only keeping it going by PRINTING MONEY oh sorry,QUANTITIVE EASING............The pound is probably only worth 50 eurocents so we are gong to have a sterling crisis very very soon.
- Bernard Michaelis, london england and sparneck germany
When will you people ever learn. If you give money to a banker that's the last you'll ever see of it. Good grief they pinch your money even before you give them any more money. What do you think caused the global financial breakdown in the first place, thieving bankers that's who.
- Len, Perth Australia
Glad I left the UK really after 25 wonderful years. So depressing to visit and see the parochial corruption and despair. Cameron simply is a boy trying to do a man's job. So sad.
- James Macleod Ritchie, Oyster Bay Cove
I want to know when i am going to get my refund of unfair bank charges. It looks like i will be suing the government soon, when the banks get nationalised.
- Mr S.Port, London
Buffet's Berkshire today has just purchased an Americam railroad BNSF for $44B.
Today our government has just bailed out banks again with an additional £40B injection.
I wonder who has the better deal...
I wish I had Berkshire shares...but no I have to pay my taxes...
- Coplani, Inverurie, Aberdeenshire.
Strange that this government is trying to cut defence spending when we are actually at war.This money that they are giving to the Banks like it is water,would double the entire Defence spending of the country
- Grumpy As Hell, Wimbledon
The national debt appears to have grown somewhat. Seemingly because of the banking/ financial collapse.
Is this the only time in UK history that the national debt has gone seriously south because of an issue other than war.
In other words, now our National debt is caused by either a war or banks/financial institutions asking for it.
Perhaps it would have been cheaper for the government to have gone to war against the banks...2 negatives might have possibly made a positive...
- Coplani, Inverurie, Aberdeenshire.
Bonuses surely are paid for achieving results "better-than-you-are-paid-to-achieve" ?
Perhaps if the banks practised transparently, we'd understand just exactly why these bonuses are being paid and against what criteria the recipients are being measured.
Since 'we' (the public) are supposed to own 84% of RBS - we should be able to force publication of this information.
- Gavin, London
There is no guarantee that it will get credit flowing in the economy.
Thanks alot for that one darling.
- Martin, sheffield
I keep reading in the financial columns that Quantitative Easing is working, but there seems to be little evidence to support that contention. We seem to be pouring billions into the banks and the economy without any sign of recovery, all of it money we don't have. Just as the Government had a "hidden policy" on immigration, I suspect they have a hidden policy on the economy - and the phrase "scorched earth" comes to mind. Brown knows he has little hope of a political comeback and is determined to leave his successors a ruined economy and an impoverished people. Shame on him.
- James Elliott, Eastbourne UK
The international banking elite have staged a coup against national governments. We are totally controlled by the banksters: we now live in a legalised kleptocracy.
- Neil, London, London UK
Unflipping believable-more money to be printed no doubt. Weimar Republic anyone?
- Jon Kent, Hertford. UK
What a mess.
- Ian Glen, Durham England.
If you breach the covenant on your loan arrangement with your Bank, they will seize the opportunity to install more punitive requirements on you or call the loan back in. Why doesn't the Government hold the banks to account on covenant terms too?
- Peace Maker, Battersea
Wonder if this bank could get a few billions from the chancellor? Afterall when I put my trousers on their is an element of quantative easing!!
As for Lloyds then why dont they go back to their roots and change their branches into coffee houses?
- Melvyn Windebank, Canvey Island, Essex
I suspect that if you look into it, a lot of the so-called bailout won't be and never has been real money - just guarantees and underwritings of the bank's debt by HMG or allocation of ownership (shares)in them to the Govt. This would explain why the banks don't actually have these supposed mountains of cash to lend out, i.e. it's not actual money they're getting for the most part.
- Fabio, Londres
Just send your signed cheque book to Calamity Brown at 10 Downing St. These morons will not be happy until you are broke and dependent on the State.
- Roger, Devon
The formation on "new" banks will lead to one outcome. Customers having to pay to have a current account and having to pay to use ATM's. Why did Williams & Glyn, TSB and Midland Bank etc disapear in the first place? Because to run a decent retail bank requires economies of scale and large ongoing IT investments. without this scale, costs have to be recouped somehow and that will be through regular fees just to have a current account and use ATM's. this is a politically motivated scam.
- Steve, Havering
ANother £33 BILLION and we only get another 14% of this failing bank? Who does these valuations, Gormless Brown?
- Mr Opinion, London
i wouldnt worry about it. the whole financial sector will start to collapse in a few years when the oil starts runningout! Up the revolution!
- S.Howard, london
Come on you clever peoples: lloyds Bank needs all the
help it can get: what price the rights issue
do we take it up and why can we not get lloyds to ditch
the nasty bank Halifax ! remember they the Halifax have just decided from Dec 6 to charge £ 1.00 per day charges on their current account / in some cases £ 2.00 per day
- Ron, LutonBeds
Another 40bn down the plug ole. Yet more proof if ever it was needed of what a complete hatchit job gordon has made of handling the orginal mess he first created.
- Chris, Rochester
Spot on James, City of London - Banana Republic here we come without the weather!
- Wallytrader, London
I hope we get plenty of interest out of them banks
- Richard Edmunds, Rayleigh UK
Brace yourselves, this will not be the last!
- Dave Davies, Basingstoke, Hants
So the Government force Lloyds to wreck their business by taking in a lame duck business that should have died, ignominiously. Lloyds as a group is devalued share and dividends plummet, investors and importantly pension funds massively loose out.
Now Lloyds is forced to sell off parts of its original profitable business, forced to keep the rubbish that should go under and issue more shares to try to extricate itself from this mess, so diluting shareholder value, including your pension funds, further.
What was Lloyds crime? It was profitable right up to the point where the government forced it to take a business that was about to go under, it did the government a favour and this is how the government returns the favour.
Oh yes the command came from Brussels but had this happened in France or Germany the government would have told the EU puppet meisters to roundly P*** off. Not so in the UK, we slavishly follow the rules that apply to the UK far more than anywhere else, very clearly to our own determent.
Now Dizzy David wants to confirm even more rules that will so ***** up this country that any business we have retained will be sent to other parts of the EU, but of course we will have to continue making a the second largest contribution to EU funds from all of the nations involved
I think you may be thinking to yourself what can I do about this mess, well this is your opportunity to make your vote count at the next election perhaps consider boycotting EU goods
- James, City of London
Pity we can not get rid of a toxic governemnt so "easily".
- Dave Davies, Basingstoke, Hants
Yet again we are seeing vast sums of taxpayer's money, including mine, injected into RBS. Yes, the very same RBS who 15 years ago devasted my financial life by their inept handling of my then business accounts including their errors, mis-sold protection insurance policies, banking malpractices etc. Oh yes, RBS said "sorry" but never offered to compensate me or re-pay the loses that they caused to me in a double financial crime.
Now, along with all other taxpayers, we are supporting them - that's rough justice and totally sickening. Is there no accountability for RBS, I wonder?
- Bernard Lockett, Folkestone, Kent.
Reuban you obviously have not heard of quantative easing - pay attention - it's on the new everyday!
We all now what happened with the banks the question is what is the best solution for the economy - I haven't heard any better, realistic, solutions, just let the banks go down which sounds good but offers no real solution.
- Gerald, London
Mick,
how much do you think the private sector would pay for the toxic bits, if they were prepared to take them at all?
its a bit more complicated than saying "you have the rubbish bits, we'll keep the good stuff".
Lloyds will be a good investment anyway.
- Scotty, London
I would like to see the Government sell off all the toxic parts of banking to the private sector, and keep the profitable parts of banking for the taxpayer, why are the taxpayers always lumbered with the crap and loss making parts of business, and the spivs end up with all the profitable parts of business?
- Mickinlondon, london
WHERE is Gormless Brown getting all these untold billions of pounds from to throw at the bankrupt banks?
Mr Prudence is borrowing over £500,000,000.00 PER DAY just to keep the public sector afloat - to be repaid in 2050.
Which means the children of today and their children will still be paying off Brown's debts in 40 years time.
- Reuben Camara, Plot 1, Morecambe Compound, EUSSR
