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UK govt set to rescue RBS, HBOS

The UK government will on Monday launch the biggest rescue of Britain's high-street banks when the UK's four biggest institutions ask for a £35 billion financial lifeline. The unprecedented move will make the government the biggest shareholder in at least two banks.

The Royal Bank of Scotland (RBS), which has seen its market value fall to under £12 billion, is to ask the government to underwrite a £15 billion cash call. HBOS, which is UK's biggest provider of mortgages, is requesting up to £10 billion.

Lloyds TSB, which is in the process of acquiring HBOS, and Barclays require £7 billion and £3 billion. The scale of the fundraising could lead to trading at the London stock market being suspended. This would be to give time for the market to digest the scale of the information and its impact. One consequence of the deal is that Lloyds could renegotiate the terms of the takeover, although both sides are still keen for it to happen.