FTSE 100 up as RBS and HBOS-Lloyds-TSB Bailout begins

October 13. saw a positive start on the FTSE 100 opening 1 percent higher and within 10 minutes of trading shot up 5 percent or 211 points at 4143.

News that the UK government have started nationalizing the Royal Bank of Scotland and HBOS by pumping £37 billion of taxpayers’ money into the troubled banks. Taxpayers will hold a 60 percent share in RBS once it received the agreed £20 billion of capital from the Government. It’s also be revealed that the Chief executive of RBS, Sir Fred Goodwin is to resign in light of the deal.

The new “Super bank” that’s been created with the merger of HBOS and Lloyds-TSB received £17 billion from the government which means that British taxpayers own 40 percent that’s held by the government.

Bad news for HBOS share holders as Lloyds TSB announced that the deal is still going ahead but at a far lower price than was originally expected. The original deal meant that HBOS share holders would receive 0.8 Lloyds shares for every HBOS share but it’s now gone down to 0.6.

Source: Telegraph