The move is the first implementation of the deal revealed last week ahead of sharp market falls seen in the UK and European markets on Thursday and Friday. The FTSE opened this morning up slightly, moving back above 4,000 as of 8:30am.
The Government intends to create a body to manage its shareholdings in the recapitalised institutions and will put into place arrangements to ensure that any role for the Government in relation to investment decision-making is clearly defined. The Treasury said the UK Government is not a permanent investor in UK banks and over time the investments in these banks is to be realized.
As part of
the capital injection plan RBS will offer ordinary shares to raise £15 billion, underwritten by the Treasury at a fixed price of 65.5 pence per share. In addition, HM Treasury will subscribe for £5 billion of preference shares in the group.
In exchange for the capital injection, RBS has committed to maintaining the availability of SME and mortgage lending at least at 2007 levels.
RBS's CEO Sir Fred Goodwin is to step down and be replaced by Stephen Hester, currently chief executive of British Land and a non-executive director of the group. RBS’s chairman Sir Tom McKillop will retire in April.
At the same time Lloyd’s TSB has said its intended merger with HBOS is to go ahead, although the terms of the deal have been updated considering the current market environment and the Government financing deals. The group stated this morning: “The revised terms agreed with HBOS are that HBOS shareholders will receive 0.605 Lloyds TSB shares for every 1 HBOS share. At the same time, an offer will also be made to HM Treasury to exchange HM Treasury preference shares in HBOS for equivalent preference shares in Lloyds TSB.”
This article originally appeared on Hemscott.com. Morningstar and Hemscott are now one company. You can see the original version of this article on the Hemscott web site.