Royal Bank of Scotland chief executive Sir Fred Goodwin has resigned today as the government agrees to inject £20bn of new capital into the bank in an effort to stabilise the markets. A further £17bn of taxpayers’ cash will be injected into HBOS and Lloyds TSB.
The Treasury insists that the government is “not a permanent investor in UK banks” and that it will dispose of investments “in an orderly way” in the future. As a condition of the deal, senior directors will get no cash bonuses this year, with future bonuses paid in the form of shares.
The plans mean taxpayers will own about 60% of RBS and around 40% of the merged Lloyds TSB and HBOS.
Lloyds TSB has also confirmed that its takeover of HBOS, owner of Halifax and Bank of Scotland, will be at a far lower price than had previously been expected. Under the revised terms HBOS shareholders will receive 0.6 Lloyds TSB shares for every HBOS share – down from an original level of 0.8
Meanwhile, Barclays has announced plans to raise £6.5bn without government help. It will issue a cash call to the market and will not pay a £2bn dividend to its shareholders. If successful, it will make Barclays the only major British-owned high street bank to be fully independent. The foreign-owned HSBC has also forgone the Government’s rescue package.