RBS and HBOS set for government cash injection
It seems as though the first stage of the UK government's recapitalisation of the UK banking sector is about to start on Monday. The market is awash with news that Treasury officials have been working with RBS and HBOS over the weekend about utilising the rescue fund which will see the government inject capital into the banks in exchange for a stake in the business.
It is not known yet how much the two banks wish to raise but it seems that it will be the first of many to make use of the fund, a fund which could be extended to others in the financial sector. However, there is some concern in the UK markets with regards to the role the government will be taking. After initially saying that they would not require board representation it seems that they may be about to go back on this promise.
If the rumours are correct it looks as though the government will at the very least require a seat on the board to 'protect taxpayers money' and at the worst demand a say in how the bank is run and business decisions - this is the worst case scenario for the UK stock market with investors concerned about the long term consequences.
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