Complete nationalisation of Lloyds not on table, says No10
Downing Street insisted today that there were no plans for the outright nationalisation of Lloyds Banking Group as shares in the company continued to struggle.
Amid growing concern about the group's position, Gordon Brown's spokesman also dismissed any suggestion that the Prime Minister regretted the Lloyds-HBOS merger.
Alarm spread after a shock warning of £10 billion in annual losses at HBOS before the weekend.
The two banks are 43 per cent owned by the state after receiving £17 billion in bailout cash, but the market value of the group is now less than £10 billion.
Lord Turner of Ecchinswell, chairman of the Financial Services Authority, suggested yesterday that HBOS could have been saved without the need for a takeover.
Tory leader David Cameron said the merger was now looking like a "bad decision".
The Prime Minister's spokesman said today that Mr Brown had no regrets "at all" - but stressed that the proposal came from the banks themselves and was supported by opposition parties.
"The idea of the merger originally came from the companies involved who approached the Government to ask us to change competition legislation in order to let it happen," he said.
"We are glad that we did that, and we did that with cross-party support at the time.
"The Prime Minister remains of the view that the merger is in the wider interest of the stability of the UK financial system and I think you have to ask yourself what would the alternative have been had Lloyds not taken over HBOS at the time.
"It would have been almost certainly that HBOS would have found it very difficult to continue. That would have meant the Government and the taxpayer intervening to support the totality of HBOS."
Asked whether the full-blown nationalisation of Lloyds was in prospect, he added: "While of course nothing is ruled out, there is no active consideration being given to the nationalisation of Lloyds."
With reports that Lloyds is planning bonuses for staff this year of £120 million, Downing Street also restated its position that there should be "no rewards for failure".
Talks between Government officials and the bosses of Royal Bank of Scotland (RBS), another partly state-owned bank planning to pay bonuses, are already under way.
Similar discussions look likely to follow with Lloyds' chiefs.
Mr Brown's spokesman said bonuses should be based on "long-term sustainable performance" and with "claw back" provisions attached, while the regulator should set guidelines for remuneration policy.
"These are the key principles and we need to discuss these with the managements of the individual banks," he added.
"In the case of RBS that is what we are in the process of doing. In the case of Lloyds we haven't actually received any proposal or had any substantive discussions with them yet.
"But we certainly rule nothing out at this stage."
There is an emerging political consensus that bonuses for bankers would be inappropriate after a year in which the system came close to collapse.
RBS has taken £20 billion in Government support and is now 68% state-owned. It is reported to be considering bonuses for staff of about £1 billion.
Liberal Democrat Treasury spokesman Vince Cable said: "As a general policy position no bonuses should be paid to banks that have failed and are dependent on the taxpayer."
David Cameron has proposed a cap of £2,000 and called for the Government to fight executives and traders in court if they try to enforce contractual entitlements to bonuses.
On the Lloyds TSB takeover of HBOS, which the Tory leader supported at the time of its proposal last autumn, Mr Cameron added that it was now looking like "a bad decision".
He added that his business spokesman Kenneth Clarke was "very perceptive" to have opposed the merger from the backbenches.
Lord Turner said yesterday that the merger seemed a "sensible way of buttressing HBOS", but added: "There could have been a different way of directly supporting HBOS and keeping Lloyds separate."
- 1 School playground evacuated over 'unusually aggressive' grey squirrel
- 2 Hollywood actor Mickey Rourke beats opponent 33 years his junior in exhibition boxing match
- 3 Jennifer Lawrence scores first UK top 40 single with Hunger Games track 'The Hanging Tree'
- 4 Today was a bad day for renters, landlords, and democracy
At least 100 dead after Islamists launch attack on Nigerian mosque
Hollywood actor Mickey Rourke beats opponent 33 years his junior in exhibition boxing match
'You should come to my house and eat cheeses with me': 4-year-old sends adorable love letter to girl at school
Scientists predict green energy revolution after incredible new graphene discoveries
Russell Brand: 'Katy Perry? I don’t know who that is'
Obama: The only people with the right to object to immigration are Native Americans
Ukip says babies born to immigrants in the UK should be classed as migrants – which would include Nigel Farage’s own children
The young are the new poor: Sharp increase in number of under-25s living in poverty, while over-65s are better off than ever
David Cameron sets out immigration reforms: We should distrust Ukip and their 'snake-oil of simple solutions'
Ukip mocked after mistaking Westminster Cathedral – for a mosque
Tamir Rice: 12-year-old boy playing with fake gun dies after being shot by Ohio police
£30k - 38k per year + Benefits: Opilio Recruitment: An award-winning consume...
£40k - 45k per year + Benefits: Opilio Recruitment: A fantastic opportunity ...
£30k - 35k per year + Benefits: Opilio Recruitment: We’re currently re...
£35k - 45k per year + benefits: Opilio Recruitment: A fantastic opportunity ...