Government gets majority stake in RBS as investors shun rights

Government will own 58 per cent of bank in historic day for the sector

The Government will hand Royal Bank of Scotland a cheque for £20bn on Monday to take a majority stake in Britain's second biggest bank after RBS shareholders snubbed a £15bn share offer to shore up its capital buffer.

RBS announced yesterday that its shareholders took up just 0.24 per cent of the new shares on offer, leaving the Treasury, which underwrote the share issue, to buy 57.9 per cent of the bank for about £15bn. The Government will also own £5bn of high-yielding preference shares. The failure of the share sale was expected because RBS's shares had consistently traded below the 65.5p offer price, meaning that they could be bought cheaper in the market. RBS shares rose 0.6 per cent to 55.3p, leaving the Government with a paper loss of £2.3bn. But the part-nationalisation is a sobering moment for British banking as what was once one of the world's most admired banks comes under the state's control.

The Treasury insists its stake in RBS will be managed at "arm's length" by UK Financial Investments, the new company it has set up to oversee its stakes in Britain's stricken lenders. But after weeks of bank-bashing, shareholders suspect that the Government will lean on RBS to make credit available to UK businesses and consumers over its international businesses.

An RBS shareholder said: "The cynical view, which is a typical fund management view, is that you can't trust the Government as far as you can throw them. If you didn't already invest in RBS, why would you invest in something where the Government, if not pulling the strings, is influencing policy?"

RBS is looking for three new independent directors, who will be vetted by the Government. The bank will not be able to pay a dividend while the Treasury holds the five-year preference shares and is paying no bonuses to executive directors this year.

The Office of National Statistics will decide in the next few weeks to what extent RBS's £1.9 trillion balance sheet will go on to the Government's books. With the Treasury holding more than half RBS's voting shares and influence over the appointment of directors, economists said the ONS would probably classify RBS as a public corporation.

RBS is the biggest recipient of extra capital after the Government forced banks to boost their buffers against losses to stabilise the banking system. RBS came close to collapse before the Government's intervention as panicked shareholders and depositors lost confidence in the once mighty bank.

The Government is also on track to buy about £17bn of stock in Lloyds TSB and Halifax Bank of Scotland that would leave it owning 43.5 per cent of the combined bank after Lloyds buys HBOS early next year. Lloyds and HBOS shares both closed below the offer prices for their capital raisings, which are also underwritten by the Government, though Lloyds shares rose 35 per cent last week to 168p, close to the 173.3p offer price.

RBS is trying to draw a line under its recent woes under new management. Stephen Hester, theformer boss of British Land, took over from Sir Fred Goodwin on Monday and has said nothing is off limits as he strips out risky businesses left over from the debt bubble. Mr Hester said: "We regret that existing shareholders did not take up their pre-emptive rights but understand that market sentiment toward the banking sector made this uneconomic in the short term. We must put the past behind us and move forward with a clear focus on what we need to do next."

Sport
footballLIVE City face Stoke, while Warnock returns to Palace dugout
Life and Style
3D printed bump keys can access almost any lock
gadgets + techSoftware needs photo of lock and not much more
News
Paul McCartney backs the
people
News
i100
PROMOTED VIDEO
Arts and Entertainment
Inside the gallery at Frederick Bremer School in Walthamstow
tvSimon Usborne goes behind the scenes to watch the latest series
Life and Style
Silvia says of her famous creation: 'I never stopped wearing it. Because I like to wear things when they are off the radar'
fashionThe fashion house celebrated fifteen years of the punchy pouch with a weighty tome
Arts and Entertainment
Gregg Wallace in Summer's Supermarket Secrets
tv All of this year's 15 contestants have now been named
News
i100Steve Carell selling chicken, Tina Fey selling saving accounts and Steve Colbert selling, um...
Life and Style
A picture taken on January 12, 2011 shows sex shops at the Paris district of Pigalle.
newsThe industry's trade body issued the moratorium on Friday
Arts and Entertainment
Could we see Iain back in the Bake Off tent next week?
tv Contestant teased Newsnight viewers on potential reappearance
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
News
i100
News
The slice of Prince Charles and Princess Diana's wedding cake and the original box from 29 July 1981
newsPiece of Charles and Diana's wedding cake sold at auction in US
Voices
The Ukip leader has consistently refused to be drawn on where he would mount an attempt to secure a parliamentary seat
voicesNigel Farage: Those who predicted we would lose momentum heading into the 2015 election are going to have to think again
Arts and Entertainment
Cara Delevingne made her acting debut in Anna Karenina in 2012
film Cara Delevingne 'in talks' to star in Zoolander sequel
Sport
Mario Balotelli pictured in his Liverpool shirt for the first time
football
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Network Engineer (CCNP, CCNA, Linux, OSPF, BGP, Multicast, WAN)

£35000 per annum: Harrington Starr: Network Engineer (CCNP, CCNA, Linux, OSPF,...

DevOps Engineer (Systems Administration, Linux, Shell, Bash)

£50000 per annum: Harrington Starr: DevOps Engineer (Systems Administration, L...

Data Scientist (SQL, PHP, RSPSS, CPLEX, SARS, AI) - London

£60000 - £70000 per annum: Harrington Starr: A prestigious leading professiona...

Financial Technical Consultant (C++, C#, Finance, MSc, PhD)

£50000 per annum: Harrington Starr: Financial Technical Consultant (C++, C#, F...

Day In a Page

Ukraine crisis: The phoney war is over as Russian troops and armour pour across the border

The phoney war is over

Russian troops and armour pour into Ukraine
Potatoes could be off the menu as crop pests threaten UK

Potatoes could be off the menu as crop pests threaten UK

The world’s entire food system is under attack - and Britain is most at risk, according to a new study
Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Gangnam smile: why the Chinese are flocking to South Korea to buy a new face

Seoul's plastic surgery industry is booming thanks to the popularity of the K-Pop look
From Mozart to Orson Welles: Creative geniuses who peaked too soon

Creative geniuses who peaked too soon

After the death of Sandy Wilson, 90, who wrote his only hit musical in his twenties, John Walsh wonders what it's like to peak too soon and go on to live a life more ordinary
Caught in the crossfire of a cyber Cold War

Caught in the crossfire of a cyber Cold War

Fears are mounting that Vladimir Putin has instructed hackers to target banks like JP Morgan
Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years

Salomé: A head for seduction

Salomé's feminine wiles have inspired writers, painters and musicians for 2,000 years. Now audiences can meet the Biblical femme fatale in two new stage and screen projects
From Bram Stoker to Stanley Kubrick, the British Library's latest exhibition celebrates all things Gothic

British Library celebrates all things Gothic

Forthcoming exhibition Terror and Wonder: The Gothic Imagination will be the UK's largest ever celebration of Gothic literature
The Hard Rock Café's owners are embroiled in a bitter legal dispute - but is the restaurant chain worth fighting for?

Is the Hard Rock Café worth fighting for?

The restaurant chain's owners are currently embroiled in a bitter legal dispute
Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival

In search of Caribbean soul food

Caribbean cuisine is becoming increasingly popular in the UK ... and there's more to it than jerk chicken at carnival
11 best face powders

11 best face powders

Sweep away shiny skin with our pick of the best pressed and loose powder bases
England vs Norway: Roy Hodgson's hands tied by exploding top flight

Roy Hodgson's hands tied by exploding top flight

Lack of Englishmen at leading Premier League clubs leaves manager hamstrung
Angel Di Maria and Cristiano Ronaldo: A tale of two Manchester United No 7s

Di Maria and Ronaldo: A tale of two Manchester United No 7s

They both inherited the iconic shirt at Old Trafford, but the £59.7m new boy is joining a club in a very different state
Israel-Gaza conflict: No victory for Israel despite weeks of death and devastation

Robert Fisk: No victory for Israel despite weeks of devastation

Palestinians have won: they are still in Gaza, and Hamas is still there
Mary Beard writes character reference for Twitter troll who called her a 'slut'

Unlikely friends: Mary Beard and the troll who called her a ‘filthy old slut’

The Cambridge University classicist even wrote the student a character reference
America’s new apartheid: Prosperous white districts are choosing to break away from black cities and go it alone

America’s new apartheid

Prosperous white districts are choosing to break away from black cities and go it alone