Related Companies

• Royal Bank of Scotland Group
• Barclays
• HBOS
• Lloyds TSB Group

Related Indices

• FTSE All-Share
• FTSEurofirst 300
• FTSE 350
• FTSE 100

Related Sectors

• Banks

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Date: Tuesday 07 Oct 2008

LONDON (ShareCast) - Share prices of Britain's leading banks plummeted today after their chief executives met chancellor Alistair Darling yesterday to discuss a possible bank sector bail-out.

Royal Bank of Scotland tumbled by a third with Barclays and Lloyds TSB and merger partner HBOS also sharply lower on concern that the talks meant a possible funding crisis for the banks.

Royal Bank shares also took a hit from a downgrade by ratings agency S&P with its share price falling below 100p at one point compared with 469p a year ago.

Barclays, though, categorically denied that it has requested any capital from the UK government. “Contrary to press rumours, Barclays has not requested capital from the government and has no reason to do so,” chief executive John Varley said. The denial was later echoed by Royal Bank of Scotland, in an almost identically worded statement.

Yetserday's meeting included Mervyn King, governor of the Bank of England, and Adair Turner, chairman of the Financial Services Authority as well as the chief executives of Royal Bank, Barclays and Lloyds TSB. The talks are said to have centred on how a £50bn capital injection into the UK banking sector could be arranged.

One plan under discussion is part-nationalisation with the government taking an equity stake in the banks. The Telegraph reported that the banks indicated they would broadly back such a plan, which would include the issue of warrants that to ensure taxpayers benefited from any revival in the share prices of the banks.

Another option apparently discussed is to raise the guarantee on retail deposits from the current level of £50,000.

Another meeting is scheduled for today with the banks reportedly looking for an assurance from the government that it will maintain liquidity in the wholesale lending market.

• News Channel