Bank plan could cost 40bn
THE Government may have to find a further £40bn to fund the continuing restructuring of Lloyds, RBS and Northern Rock, it emerged yesterday.
The biggest injection will be into RBS, which might receive as much as £26bn as a result of participating in the government’s toxic insurance scheme.
Lloyds Banking Group will need up to £7bn so that the government can maintain its stake in the group at 43 per cent if the bank goes ahead with a plan to issue more shares, raising cash and allowing the bank to avoid buying insurance through the so-called asset protection scheme.
And Northern Rock is to be loaned an extra £8bn so that it can be split in two, as sanctioned by the EU last week, and become an active mortgage lender again.
Shadow financial secretary Mark Hoban said that the Conservatives have been calling for more competition in the banking system for some months, and that the government had only belatedly come to the same view. But he warned: “It is vital that the government does not simply sell off the taxpayers’ shareholding to the highest bidder without considering the wider implications for a competitive healthy banking sector.”
Liberal Democrat shadow chancellor Vince Cable said the case for creating more competition in the UK retail banking sector was compelling, but that the project should be firmly conducted over the long term.
“There’s no justification for a rapid sell-off of assets in the current depressed environment when the taxpayer will get a very poor deal,” he said. “The most important priorities are to make sure banks lend to good customers, especially businesses, in order to stave off deepening recession and growing unemployment and that the taxpayer gets value for money.