Taxpayer cash bail-out unveiled Taxpayers to become biggest shareholders in banks
13 October 2008
Taxpayers are set to become the biggest shareholders in the combined Lloyds TSB-Halifax Bank of Scotland "superbank".
The two banks plan to raise an extra £17 billion to boost their balance sheets and are appealing to existing shareholders for a total of £13 billion.
If investors snub the new shares, the Treasury will take them up, leaving it with a potential stake of up to 43.5% in the new business.
The prime minister said the dramatic action would help the UK banking industry to survive the turbulence sweeping the world's financial system. It will also lead to UK taxpayers owning about 60% of RBS and 40% of the merged Lloyds TSB and HBOS.
The Prime Minister told a Downing Street news conference that the action the government was taking was "unprecedented but essential".
"In extraordinary times, with financial markets ceasing to work, the government cannot just leave people on their own to be buffeted about," he said.
"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."
Taxpayer's exposed to risk
News of the taxpayer's potential large exposure to the struggling banking sector came as HBOS - the UK's biggest mortgage lender - chose this morning to issue a profits warning.
HBOS said market conditions had "deteriorated significantly" since the end of June as house price falls gather pace.
However, the Prime Minister stressed that the investments were assets and, "not just money being pumped in", he added, saying the government was: "not a permanent investor in UK banks".
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