statism watch

Flashback: More US Bank Failures and The Coming Deposit Insurance Bailout | Irish state plans to take majority stake in debt-ridden banks | US govt considers becoming bank shareholder | UK government takes control over Lloyd’s bank | Greenspan backs bank nationalisation | Bush outlines radical plan to part-nationalise bank | US considers following British example of taking stakes in banks | New World Order: Global co-operation, nationalisation and state intervention – all in one day | Bilderberg Seeks Bank Centralization Agenda | Banks face “new world order,” consolidation: report

Robert Barr, Associated Press
November 3, 2009

Royal Bank of Scotland to get billions from government and sell assets to comply with conditions for state aid

Britain pressed ahead Tuesday with a fresh wave of restructuring in its crisis-ravaged banking system, as Lloyds sought at least £21-billion ($34.2-billion U.S.) through a record share issue and debt swap.

Another bailed-out financial institution, Royal Bank of Scotland, said it would get another £25.5-billion from the government and sell assets to comply with conditions for state aid.

Both banks agreed to curbs on bonuses, the Treasury said, describing the revised terms for taxpayer support as evidence of a marked improvement in conditions.

The government said it was using its ownership stakes in the banks, gained in return for earlier bailouts, to strengthen their finances, reduce risks to the taxpayers and ensure competition and consumer protection in the industry. Under urging from European Union competition authorities, the government has made it clear bailed out banks will have to sell and restructure some of their businesses in return for aid.

“The news is potentially good for both U.K. consumers and rival banking groups, although more debatable for both Lloyds and RBS shareholders,” said Keith Bowman, analyst at Hargreaves Lansdown Stockbrokers.

“U.K. consumers will in theory enjoy increased choice and lower pricing, while rivals such as HSBC will be glad to see their rivals paying for their mistakes.”

Shares in Lloyds Banking Group PLC shares rose 4 per cent to 88.41 pence on the London Stock Exchange but RBS fell 1.1 per cent at 38.22 pence.

“I believe that what we have got here is better structured,” Treasury Chief Alistair Darling said in a British Broadcasting Corp. interview. “It is a better deal for the taxpayer.”

Lloyds said it would seek to raise a record £13.5-billion through a rights issue, surpassing the £12.5-billion raised in March by HSBC. It also said it would raise at least £7.5-billion from an exchange of debt.

Lloyds, which was also bailed out by taxpayers at the height of the financial crisis, said it would not be subscribing to a government insurance program against losses on toxic assets – a move that will keep the public’s stake in the bank at 43.4 per cent after the government takes its part of the rights issue.

Elsewhere, Lloyds said it had a “good revenue performance” in the third quarter and had pared costs by 2 per cent so far this year. However, it still expects a full-year loss.

Royal Bank of Scotland Group PLC, 70 per cent owned by the government, announced that it had negotiated revised terms for insurance on toxic assets and disclosed disposal plans to comply with European Union conditions for receiving state aid.

Part of that deal calls for the government to inject £25.5-billion of fresh capital through the purchase of ‘B’ shares.

RBS will sell its branch network in England and Wales and NatWest branches in Scotland, and also dispose of RBS Insurance, Global Merchant Services and its stake in RBS Sempra Commodities to meet EU conditions for receiving state aid.

Meanwhile, Lloyds said it would dispose of its TSB brand, Scottish TSB branches and some other TSB branches in England and Wales. It will also sell the branches, savings accounts and branch-based mortgages of its Cheltenham & Gloucester unit.

Both banks have agreed not to pay discretionary bonuses for 2009 performance to any employee who earns more 39,000 pounds per year, and members of both boards agreed to defer all bonuses for 2009 until 2012, the Treasury said.

RBS agreed to revised asset insurance terms which will make the bank absorb the first £60-billion of losses, compared to the earlier plan to absorb £42-billion in losses.

The value of the assets to be insured has been reduced from £325-billion to £282-billion. RBS will pay a fee of £700-million a year for three years, and £500-million a year for the life of the insurance, rather than the upfront fee of £6.5-billion agreed in February.

To protect against serious reverses, the government will provide a contingent capital commitment of up to £8-billion for RBS, which would be available only if the bank’s capital position deteriorates.

RBS has also pledged that its debt will be managed so that the bank ranks no higher than fifth in the combined global debt rankings of banks.

“I believe today marks a key milestone in the radical restructuring we are undertaking to bring RBS back to stand-alone strength,” said RBS chief executive Stephen Hester.

Lloyds has agreed to pay the government a fee of £2.5-billion in return for the implicit protection already provided by government support.

“The greatest ‘triumph’ of this entire episode for Lloyds is probably the capitulation by Brussels, possibly assisted by the U.K. government, apparently choosing to give Lloyds special treatment in comparison to all other state-aided banks,” said analysts at Exane BNP Paribas.

“It appears strange that Lloyds is only required to sell (within four years) a selection of assets … all of which it might well have chosen to sell anyway.

Source | See also under Nationalization: Irish state plans to take majority stake in debt-ridden banks | Flaherty chooses himself as authority on banking oversight | Ontario to subsidize electric cars as auto-sector boost | Nationalized General Motors emerges from bankruptcy after 40 days | Nationalized General Motors gets go ahead from US judge | Bankster “Holiday” Planned for September? | Harper ‘not counting on’ recouping billions loaned to GM | Government to acquire ’substantial’ stake in Citigroup | ‘New GM’ to emerge from bankruptcy | U.S. judge approves sale of Chrysler assets to Fiat | Auto bailout costs soar, contribute to $50B deficit | US could own 69% of GM as bankruptcy looms | Autoworkers accept GM deal in 86% vote | GM, CAW reach new labour deal | GM Canada plans to cut 40% of its dealer network | Oshawa truck plant closes | GM deal likely involves bigger sacrifices: McGuinty | GM execs dump stock, shares plummet | GM bankruptcy likely, CAW says | Chrysler Canada assembly plants shut down | Banker at heart of credit crisis leads plan to buoy auto sales | Ontario mulls equity stake in GM | US government may take controlling share of General Motors | US govt considers becoming bank shareholder | GM chief says company is preparing in case it files for bankruptcy | Aussies Announce $31B National Broadband Network | Whitehouse fires General Motors CEO | Geithner wants a bigger stick | UK government takes control over Lloyd’s bank | GM pensions: Who’s responsible? | GM wants twice as much taxpayer’s money | Greenspan backs bank nationalisation | World stocks fall on skepticism over U.S. bank plan | Britain unveils plans for nationalized internet service | Auto bailout gives Federal, Provincial governments incremental nationalization powers | Canadian auto bailout could reach more than $4-billion | U.S. to spend $17.4-billion to ‘rescue’, nationalize auto industry | State to bail out, control US auto industry | Bush outlines radical plan to part-nationalise bank | US considers following British example of taking stakes in banks | New World Order: Global co-operation, nationalisation and state intervention – all in one day

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