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."

Arts and Entertainment
arts + entsWith one of the best comic roles around, it's no wonder she rarely bothers with films
News
people
News
i100
News
Davis says: 'My career has been about filling a niche - there were fewer short actors and fewer roles – but now I'm being offered all kinds of things'
PeopleWarwick Davis on Ricky Gervais, Harry Potter and his perfect role
PROMOTED VIDEO
Voices
A Russian hunter at the Medved bear-hunting lodge in Siberia
Save the tigerWildlife charities turn to those who kill animals to help save them
Sport
Frank Lampard will pass Billy Wright and equal Bobby Charton’s caps tally of 106 caps against
sportFormer Chelsea midfielder in Etihad stopgap before New York contract
News
i100
Sport
Usain Bolt of Jamaica smiles and shakes hands with a competitor after Jamaica won their first heat in the men's 4x100m relay
sport
News
ebookA unique anthology of reporting and analysis of a crucial period of history
News
Chancellor George Osborne, along with the Prime Minister, have been 'complacently claiming the economy is now fixed', according to shadow Chancellor Ed Balls
i100... which is awkward, because he is their boss, after all
Arts and Entertainment
The first film introduced Daniel Radcliffe to our screens, pictured here as he prepares to board the train to Hogwarts for the first time.
booksHow reading Harry Potter helps children grow up to be gay-friendly
Life and Style
A small bag of the drug Ecstasy
Health
News
i100
Life and Style
Floral-print swim shorts, £26, by Topman, topman.com; sunglasses, £215, by Paul Smith, mpaulsmith.co.uk
FashionBag yourself the perfect pair
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

Financial Analyst - Forecasting - Yorkshire

£300 - £350 per day: Orgtel: Financial Analyst, Forecasting, Halifax, Banking,...

Business Architect - Bristol - £500 per day

£500 per day: Orgtel: Business Architect - Banking - Bristol - £500 per day A...

Regulatory Reporting-MI-Bank-Cardiff-£300/day

£200 - £500 per day + competitive: Orgtel: I am currently working on a large p...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: Real Staffing are currently lo...

Day In a Page

Save the Tiger: Meet the hunters tasked with protecting Russia's rare Amur tiger

Hunters protect Russia's rare Amur tiger

In an unusual move, wildlife charities have enlisted those who kill animals to help save them. Oliver Poole travels to Siberia to investigate
Transfers: How has your club fared in summer sales?

How has your club fared in summer sales?

Who have bagged the bargain buys and who have landed the giant turkeys
Warwick Davis: The British actor on Ricky Gervais, how the Harry Potter set became his office, and why he'd like to play a spy

'I'm a realist; I know how hard this business is'

Warwick Davis on Ricky Gervais, Harry Potter and his perfect role
The best swim shorts for men: Bag yourself the perfect pair and make a splash this summer

The best swim shorts for men

Bag yourself the perfect pair and make a splash this summer
Has Ukip’s Glastonbury branch really been possessed by the devil?

Has Ukip’s Glastonbury branch really been possessed by the devil?

Meet the couple blamed for bringing Lucifer into local politics
Dress the Gaza situation up all you like, but the truth hurts

Robert Fisk on Gaza conflict

Dress the situation up all you like, but the truth hurts
Save the tiger: Tiger, tiger burning less brightly as numbers plummet

Tiger, tiger burning less brightly

When William Blake wrote his famous poem there were probably more than 100,000 tigers in the wild. These days they probably number around 3,200
5 News's Andy Bell retraces his grandfather's steps on the First World War battlefields

In grandfather's footsteps

5 News's political editor Andy Bell only knows his grandfather from the compelling diary he kept during WWI. But when he returned to the killing fields where Edwin Vaughan suffered so much, his ancestor came to life
Lifestyle guru Martha Stewart reveals she has flying robot ... to take photos of her farm

Martha Stewart has flying robot

The lifestyle guru used the drone to get a bird's eye view her 153-acre farm in Bedford, New York
Former Labour minister Meg Hillier has demanded 'pootling lanes' for women cyclists

Do women cyclists need 'pootling lanes'?

Simon Usborne (who's more of a hurtler) explains why winning the space race is key to happy riding
A tale of two presidents: George W Bush downs his paintbrush to pen father’s life story

A tale of two presidents

George W Bush downs his paintbrush to pen father’s life story
Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover

The dining car makes a comeback

Restaurateur Mitch Tonks has given the Great Western Pullman dining car a makeover
Gallery rage: How are institutions tackling the discomfort of overcrowding this summer?

Gallery rage

How are institutions tackling the discomfort of overcrowding this summer?
Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players

Eye on the prize

Louis van Gaal has £500,000 video surveillance system installed to monitor Manchester United players
Women's rugby: Tamara Taylor adds fuel to the ire in quest to land World Cup

Women's rugby

Tamara Taylor adds fuel to the ire in quest to land World Cup