Monday 13 October 2008

UK: the banking 'bail out' and corporate governance

In his statement to Parliament today, the Chancellor provided further information about the governance changes in those banks which will benefit from the Government's £ 37 billion of funding. 

With regard to Lloyds TSB plc and HBOS plc, the Government will purchase ordinary and preference shares when the merger is complete (representing about 44% of the share capital in the merged bank) and will appoint two independent board members. No board member will receive a cash bonus this year.

In the case of Royal Bank of Scotland plc, the Government will take up to £ 15 billion of ordinary shares and £ 5 billion of preference shares. The Government's investment potentially represents a 63% interest in RBS plc. Three independent board members will be appointed by the Government and no bonus will be awarded to any board member this year.

Note: It is not clear from the Government's announcement whether the Government appointees will replace existing non-executive directors. It is also unclear what will happen with bank bonuses beneath board level. 

No comments: