October 14, 2008	Tuesday	Shawwal 14, 1429

LONDON, Oct 13: The UK government continued the process of part nationalisation of major private banks that began midway last week and pumped as much as £37 billion into the banking sector on Monday in return for a major say in the policy management of the banks receiving the bailout money.

The immediate and major beneficiaries of the bailout package are Royal Bank of Scotland, Lloyds TSB and HBOS. All were facing imminent meltdown.

In return for the help of £20 billion from the taxpayers’ money the government will take a controlling stake of up to 60 per cent in RBS. Also Chief Executive Sir Fred Goodwin and Chairman Sir Tom McKillop have been forced by Prime Minister Gordon Brown to step down.

The Chancellor, Alistair Darling, said that Goodwin and McKillop had waived their contractual entitlements to payoffs.

Lloyds will receive up to £17 billion and in return the government will get up to 43.5 per cent of the group, including HBOS, with Lloyds’ shareholders owning 36.5 per cent and HBOS’s investors just 20 per cent.

The government could also face a £6.5 billion cash call from Barclays.

The Guardian on Monday said that in return for providing fresh liquidity, the government had secured a series of concessions. RBS and Lloyds have both agreed not to pay a dividend this year — and possibly for several more — and to help people who are struggling to pay their mortgages. They will not pay any cash bonuses this year, and have agreed to let the government appoint several board members.

Chancellor Darling said it was appropriate for the government to take seats on the boards of both companies, but insisted that they would continue to operate commercially at arms length from the government.

“Ministers aren’t going to get involved in the day-to-day running,” he said.

The government has also insisted that bank directors will no longer walk away with large payoffs. Prime Minister Brown told a press conference that the government would no longer tolerate “rewards for failure”.

Both RBS and Lloyds said on Monday that directors who were dismissed would receive “a severance package which is reasonable and perceived as fair”.

The Financial Services Authority added its weight behind the clampdown on executive pay. It wrote to the heads of the UK banks on Monday, warning that “bad” remuneration policies were not acceptable in the current climate and urging them to review their pay policies.

With the UK economy facing a protracted slowdown, the Unite urged the government to avoid any compulsory job losses as part of the rescue.

“The government has shown strong leadership and decisiveness in a time of great uncertainty. The measures announced on Monday must be bound to undertakings by the banks of no job losses, no repossessions and an end to the bonus culture,” said Derek Simpson, the joint general secretary of Unite.

“Thatcher buried Keynesian economics and the current crisis shows just how wrong she was. Government intervention is not only necessary in the financial services but intervention on a wider scale is necessary to protect jobs and the economy in a recession,” he added.