Banks’ support for homeowners

UK banks have been ordered to increase lending to homeowners and small businesses as the most comprehensive state bail-out ever of the country’s banking sector gets under way.

The Government has unveiled £37 billion of emergency funding for three of Britain's biggest banks. Royal Bank of Scotland (RBS) is to raise £20 billion, Lloyds TSB £5.5 billion and HBOS £11.5 billion, including £3 billion through preference shares with the Government.

The quid pro quo means the banks will have to offer competitively-priced lending to homeowners and to small businesses, and support schemes to help people struggling with mortgage payments to stay in their homes.

Chancellor Alistair Darling said that the Government is injecting "very substantial sums" into the banks in order to stabilise the system.

"There will be restrictions on what happens on boardroom pay and we are also getting guarantees in relation to increased lending to businesses, as well as to mortgages too," he said.

The Government has pledged to review the remuneration of senior executives - both for 2008, when it expects no cash bonuses to be paid to board members, and for long-term incentive schemes.

Whitehall will have a say on the appointment of new independent non-executive directors and on dividend policy.

Copyright © PA Business 2008

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