Word: britishers
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Less than a week after the British government sketched an $850 billion plan to steady a nervous banking sector and kick-start a recovery, the details are emerging. Following a flurry of meetings over the weekend, the British Treasury said Monday that it plans to spend as much as $63 billion bolstering the capital bases of three of the country's largest banks, partially nationalizing once mighty lenders in the process. "Today's plan is unprecedented," British Prime Minister Gordon Brown said at a Downing Street press conference, "but essential...
...fruits of tense negotiations between the government and British lenders - talks given added urgency by the meltdown in global markets at the end of last week - the bailout is breathtaking for its scale. British taxpayers are on the hook for a $34 billion investment in the Royal Bank of Scotland (RBS), Britain's second-largest lender, a cash injection amounting to almost double the bank's current market capitalization. Most of the investment will take the form of ordinary shares, which private investors are invited to purchase along with the government. But under the deal, those shares yield no dividends...
...cash bonuses for execs of the three institutions this year (though their annual salaries, all upwards of $1.5 million, will remain intact). Future remuneration will be more closely tied to the banks' long-term performance. Government-appointed directors will join the lenders' boards. And, crucially for the wider British economy, the banks have pledged to boost lending to homeowners and small businesses to last year's levels...
...does need to be effective. Following the British bailout, the three British banks will now have capital ratios above 9%, by the most important measure, well above international minimum requirements - "a level that should put them on a strong footing for the future," the Treasury reckoned in a statement. Having bet big, the government, for one, will be hoping that stronger future arrives soon...
According to a Westminster source, the British government urged Iceland to apply to the International Monetary Fund for assistance. Instead, Iceland is negotiating a loan from another country accustomed to being regarded as the bad guy by Britons: Russia. With relations between Moscow and London in a deep freeze since the 2006 murder of former Russian spy Alexander Litvinenko, the display of Russian-Icelandic amity helps confirm Reykjavik's status as a British bogeyman. That won't worry the British government at all. In times of crisis, it's good to have friends, but it's even more useful...