Related Companies

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

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

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• Banks

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Date: Monday 13 Oct 2008

LONDON (ShareCast) - No cash bonuses in 2008 and a say on dividend policy are part of the government's requirements in return for its £37bn cash injection into three of Britain's best-known high street banks.

Royal Bank of Scotland is to receive £20bn, while HBOS and Lloyds will get £17bn jointly.

"Following the completion of these capital investments, each of the above institutions will have a Tier 1 capital ratio in excess of 9% well above international minimum standards and at a level that should put them on a strong footing for the future," a statement from the Treasury said.

The measures will provide them with sufficient liquidity in the short term and give them time to restructure their finances, the statement added.

As part of the deal, the government has the right to agree with boards the appointment of new independent non-executive directors, while the Treasury says the banks had committed to lending to homeowners and to small businesses at 2007 levels over the next three years.

Remuneration of senior executives is also to be more closely scrutinised. There will be no cash bonuses in 2008, though options were not mentioned. Remuneration policy going forward will be reviewed and "linked to long-term value creation, taking account of risk; and restricting the potential for 'rewards for failure".

Also, the banks will give support for schemes to help people struggling with mortgage payments to stay in their homes, and to support the expansion of financial capability initiatives.

"The government is not a permanent investor in UK banks. Its intention, over time, is to dispose of all the investments it is making as part of this scheme in an orderly way," it added.

• News Channel