Last week the government stressed that it did not want to take seats on the boards of the banks into which it was injecting money. But today’s injection of £37bn into the Royal Bank of Scotland and into Lloyds TSB and HBOS ahead of their merger will see the government taking seats.
The New York Times has an explanation for this volte-face:
“It also turns out that the charters of some banks did not allow the issuing of enough preferred shares to boost the banks’ capital ratios to safe levels. This means that, in order to top up the banks’ reserves, the government needs to make part of its investment in the form of common shares.
“It looks like somebody didn’t do their homework across the pond,” one securities attorney told DealBook, asking not to be identified because his firm does work with the British government.”
Who knows what else we’ll find out when we dig into the details of these schemes.
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