| GEO Business|
| UK plans to inject £25.5 bn in RBS|
| Updated at: 0547 PST, Saturday, February 28, 2009|
LONDON: The UK revealed yesterday it was planning to inject up to £25.5bn ($36.5bn) in additional capital into Royal Bank of Scotland as part of a plan to stabilise the beleaguered lender and prevent it from being fully nationalised.
The injection, under a government scheme to ringfence £325bn of RBS's assets against large future losses, is the first of what is expected to be a series of banking bail-outs designed to kick-start lending to the ailing British economy. Lloyds Banking Group, which includes HBOS, is today expected to reveal details of a similar scheme to ringfence up to £250bn of potentially bad assets.
The long-awaited move came as RBS reported a £24.1bn loss for 2008, the largest in British corporate history, and revealed that businesses with assets of about £240bn - almost a quarter of the bank's balance sheet - would be sold or wound down over the next three to five years.
The losses and insurance scheme are further evidence of the dire state of RBS, which was bailed out by the government last October after suffering heavy losses largely arising from its role in the hostile takeover of ABN Amro, the Dutch lender.
The bank is putting £325bn of its assets into the scheme. RBS will bear initial losses on the insured assets of £19.5bn, after which, for additional losses, the government will absorb 90 per cent and RBS 10 per cent.
Under the deal, RBS will issue up to £25.5bn of non-voting but dividend-paying "B" shares to the government. If all are converted into ordinary shares, this would increase the government's economic ownership to about 95 per cent, though its voting rights will be capped at 75 per cent.
Shares in RBS closed at 29p, up 5.9p, in London.