ID :
24127
Mon, 10/13/2008 - 13:31
Auther :
Shortlink :
http://m.oananews.org//node/24127
The shortlink copeid
UK to launch 35 bln pound banking lifeline: Report
London, Oct 12 (PTI) The U.K. will launch the biggest rescue plan Monday to cover Britain's top banks -- R.B.S., H.B.O.S., Lloyds T.S.B. and Barclays -- when these four financial giants ask for a combined 35 billion pound (USD 55.5 billion) lifeline, says a media report.
"The government will launch the biggest rescue of Britain's high-street banks tomorrow when the U.K.s four biggest institutions ask for a 35 billion pound financial lifeline," The Sunday Times reported.
Royal Bank of Scotland (R.B.S.), which has seen its market value fall to below 12 billion pound, is to ask ministers to underwrite a 15 billion pound cash call. While, Halifax Bank of Scotland (H.B.O.S.), leading provider of mortgages, is seeking up to 10 billion pound.
Besides, Lloyds T.S.B., which is in the process of acquiring H.B.O.S. in a rescue merger, wants 7 billion pound, while Barclays needs 3 billion pound.
The daily further said the scale of the fund-raising
could lead to suspension of trading at the London stock
market. "This would give time for the market to digest the
impact of the moves," The Sunday Times said.
The newspaper further said "one consequence of the deal
might be that Lloyds could renegotiate the terms of the
H.B.O.S. takeover, although both sides are still keen for the
merger to take place."
The British rescue plan could leave the government owning
70 percent of H.B.O.S. and 50 percent of R.B.S. As a result it
could take board seats at both companies and exercise control
over future dividend payments.
Quoting an economist who declined to be named the
newspaper said "this is the biggest risk of the U.K.s balance
sheet ever undertaken. No-one knows the extent of the toxic
assets these banks are exposed to".
Banking sources say the combined loss of capital of the
banks as a result of the credit crisis was 150 billion pound
but some of that has already been made up by earlier
capital-raising exercises and some will not be needed because
the banks will be more constrained in their future lending.
"Crisis talks were taking place this weekend between the
Treasury, the Financial Services Authority, the Bank of
England and heads of the four retail banks," The Sunday Times
said, adding that "as part of the fund-raising it is likely
that banks will also have to own up to future losses from
their exposure to sub-prime mortgages and other financial
instruments".
The governor of the Bank of England, Mervyn King has
reportedly told the banks to ask for more than they need. This
is to make sure that their capital position is strengthened
sufficiently to absorb shocks and to withstand a long
recession. "Further capital is also available and the Treasury
has increased the total amount to 75 billion pound," the
newspaper said.
"In addition, Barclays is trying to raise about 3 billion
pound from Middle Eastern sovereign-wealth funds, including
the Qatar Investment Authority, as well as Asian investment
houses, including Japans Sumitomo Mitsui Banking
Corporation," the daily added.
Last week Britain had put in place a 500-billion pound
rescue package, including 50-billion pounds to
part-nationalise some of its top banks.
Besides earmarking a 50-billion pound package for buying
shares of banks such as H.S.B.C., Barclays, Standard Chartered
and H.B.O.S., the government also said it would provide 200
billion pounds in short-term loans and issue 250 billion
pounds to guarantee loans between banks.
"The government will launch the biggest rescue of Britain's high-street banks tomorrow when the U.K.s four biggest institutions ask for a 35 billion pound financial lifeline," The Sunday Times reported.
Royal Bank of Scotland (R.B.S.), which has seen its market value fall to below 12 billion pound, is to ask ministers to underwrite a 15 billion pound cash call. While, Halifax Bank of Scotland (H.B.O.S.), leading provider of mortgages, is seeking up to 10 billion pound.
Besides, Lloyds T.S.B., which is in the process of acquiring H.B.O.S. in a rescue merger, wants 7 billion pound, while Barclays needs 3 billion pound.
The daily further said the scale of the fund-raising
could lead to suspension of trading at the London stock
market. "This would give time for the market to digest the
impact of the moves," The Sunday Times said.
The newspaper further said "one consequence of the deal
might be that Lloyds could renegotiate the terms of the
H.B.O.S. takeover, although both sides are still keen for the
merger to take place."
The British rescue plan could leave the government owning
70 percent of H.B.O.S. and 50 percent of R.B.S. As a result it
could take board seats at both companies and exercise control
over future dividend payments.
Quoting an economist who declined to be named the
newspaper said "this is the biggest risk of the U.K.s balance
sheet ever undertaken. No-one knows the extent of the toxic
assets these banks are exposed to".
Banking sources say the combined loss of capital of the
banks as a result of the credit crisis was 150 billion pound
but some of that has already been made up by earlier
capital-raising exercises and some will not be needed because
the banks will be more constrained in their future lending.
"Crisis talks were taking place this weekend between the
Treasury, the Financial Services Authority, the Bank of
England and heads of the four retail banks," The Sunday Times
said, adding that "as part of the fund-raising it is likely
that banks will also have to own up to future losses from
their exposure to sub-prime mortgages and other financial
instruments".
The governor of the Bank of England, Mervyn King has
reportedly told the banks to ask for more than they need. This
is to make sure that their capital position is strengthened
sufficiently to absorb shocks and to withstand a long
recession. "Further capital is also available and the Treasury
has increased the total amount to 75 billion pound," the
newspaper said.
"In addition, Barclays is trying to raise about 3 billion
pound from Middle Eastern sovereign-wealth funds, including
the Qatar Investment Authority, as well as Asian investment
houses, including Japans Sumitomo Mitsui Banking
Corporation," the daily added.
Last week Britain had put in place a 500-billion pound
rescue package, including 50-billion pounds to
part-nationalise some of its top banks.
Besides earmarking a 50-billion pound package for buying
shares of banks such as H.S.B.C., Barclays, Standard Chartered
and H.B.O.S., the government also said it would provide 200
billion pounds in short-term loans and issue 250 billion
pounds to guarantee loans between banks.
