Moving to put a safety net under the city, the British government is to inject 47 billion euros of taxpayers’ money into three major UK banks. The cash will go to bail out Royal Bank of Scotland and two that are in the process of merging – HBOS and Lloyds TSB.
The emergency move will make the British government a majority shareholder in RBS with over 60 per cent of its stock and a main investor in Lloyds TSB and HBOS with around 40 per cent.
In return for getting public money, the banks have to end excessive management bonuses and scrap their dividends to shareholders. Top bosses at RBS and HBOS will also step down.
British Prime Minister Gordon Brown said this will introduce stability: “In extraordinary times, with the financial markets ceasing to work, the government cannot just leave people on their own to be buffeted about. For savers, for small businesses and for homeowners, we must, in an uncertain and an unstable world, be the rock of stability upon which British people can depend.”