UK banks receive £37bn bail-out

The government is to pump billions of pounds of taxpayers money into three UK banks in one of the UK's biggest nationalisations.

Royal Bank of Scotland (RBS), Lloyds TSB and HBOS will have a total of £37bn injected into them.

In return for the investment, the government will get a say in how the banks are run, including controls over the bonuses paid to management.

BBC business editor Robert Peston said the banks faced "absolute humiliation".

It would "count as perhaps the most extraordinary day in British banking history", he added.

'Extraordinary times'

RBS is to raise £20bn with a further £17bn to be put into HBOS and Lloyds TSB. Barclays intends to raise £6.5bn without government help.

Taxpayers will own about 60% of RBS and 40% of the merged Lloyds TSB and HBOS.

Prime Minister Gordon Brown said the bail-out was: "unprecedented but essential for all of us", and would thaw frozen money markets.

"In extraordinary times, with financial markets ceasing to work, the government cannot just leave people on their own to be buffeted about," he added.

Mr Brown insisted the investments were assets and, "not just money being pumped in", adding the government was "not a permanent investor in UK banks".

"Its intention, over time, is to dispose of all the investments it is making as part of this scheme in an orderly way," he said.

The Treasury cash forms part of the government rescue plan announced last week.

Management shake-up

As part of the banks' announcements:

Lloyds and HBOS said they had renegotiated their merger, reducing the number of Lloyds TSB shares that HBOS shareholders will receive.
RBS said chief executive Fred Goodwin was quitting with immediate effect - without a severance pay-off. He will be replaced by British Land boss Stephen Hester. RBS chairman Tom McKillop is to retire.
HBOS chief executive Andy Hornby and chairman Lord Dennis Stevenson said they would stand down from their posts.
RBS and Lloyds TSB/HBOS will return mortgage and small-business lending to 2007 levels, which is much more than they are currently lending.

Other developments included:

Major central banks saying they would offer financial institutions an unlimited amount of short-term dollar loans to help stem the crisis.
London's FTSE 100 index rising by about 5% as investors reacted to the news, though banking shares were mixed.