Taxpayer funds another bank bailout (From Andover Advertiser)

Taxpayer funds another bank bailout

7:11pm Saturday 7th March 2009

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Chancellor Alistair Darling has insisted propping up Lloyds Banking Group was "vital" for the economy as he unveiled another multi-billion pound bailout.

The taxpayer will own a controlling interest in the struggling company after it was agreed to underwrite £260 billion in "toxic" assets.

Under a deal announced after weeks of wrangling, the Government's stake in Lloyds will rise from 43% to at least 65%.

The Treasury will also buy billions of pounds worth of non-voting shares that could be upgraded later - potentially taking its active interest to 75%.

In return, Lloyds has been ordered to help drag UK plc out of recession by providing £28 billion of extra mortgage and business lending over the next two years.

Mr Darling said: "This agreement with Lloyds is another vital step in our efforts to clean up banks' balance sheets and give them the strength and confidence to increase their lending.

"Lloyds' commitment to lend an additional £14 billion this year, on top of the £25 billion committed by RBS, gets to the heart of the problems we face as a result of the global credit crunch by easing the flow of credit in the economy.

"Restoring our banks to full health and ensuring that they are able to support creditworthy families and businesses is an essential part of any plan for recovery. If we and other countries don't fix our banking systems we won't fix the rest of the economy."

Ministers appear to have forced through a far tougher package than wanted by the Lloyds' board, which had fought to avoid the bank becoming majority public-owned.

The tough terms of the agreement will up the pressure on Eric Daniels, group chief executive for Lloyds Banking Group, who drove through the merger.

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