Royal Bank of Scotland
will receive 37 billion pounds ($64 billion) from the U.K. to boost their Tier One capital ratios, the U.K. government said Monday.
"With continuing exceptional instability in the global financial markets, the government is today taking decisive action,'' the Treasury said, reports
. ``The overall aim of these measures is to support stability in the financial system.''
Royal Bank of Scotland said in a statement it will boost its capital by 20 billion pounds, including the U.K. government taking 5 billion pounds in preference shares and 15 billion pounds underwritten by the government, according to a report from
. RBS CEO Fred Goodwin also resigned and will be replaced by Stephen Hester, CEO of
said in a statement Monday that it would boost its capital by more than 6.5 billion pounds without calling on the government for funding.
Banks will try to sell shares to existing investors, backed up by the government, which will buy the shares not taken up,
The rescue plan could result in the government becoming the biggest shareholder, and even a majority investor, in Royal Bank of Scotland and a combined HBOS/Lloyds TSB upon the completion of the merger of the two companies,
The Treasury said it doesn't expect board members at banks supported by the recapitalization scheme to receive any cash bonuses in 2008,
reports. It also is requiring banks to maintain the availability of competitively-priced lending to homeowners and has the right to appoint new independent non-executive directors.
This article was written by a staff member of TheStreet.com.