Government in £37bn bank takeover

Gordon Brown has said the government would be a "rock of stability" amid the global financial turmoil, as it unveiled a £37bn bail-out for three of Britain's biggest banks.

The prime minister, speaking at a press conference on Monday, said: "In extraordinary times, with financial markets ceasing to work, the government cannot just leave people on their own to be buffeted about.

"For savers, for small businesses, and for homeowners, we must, in an uncertain and unstable world, be the rock of stability on which the British people can depend."

Royal Bank of Scotland is to raise £20bn of new capital through a government-guaranteed £15bn ordinary share issue and buying £5bn of preference shares.

A further £17bn of taxpayers' money will be injected into HBOS and Lloyds TSB.

The announcement means taxpayers will end up owning about 60 per cent of RBS and about 40 per cent of the merged Lloyds TSB and HBOS.

Barclays announced it was not turning to the government for help, but would raise £6.5bn from investors to shore up its balance sheet.

As part of the plan, the government will have a say on the appointment of new independent non-executive directors and on dividend policy.

It has also pledged to review the pay and bonuses of senior executives.

Banks have also been told to commit to lending competitively to homeowners and small businesses.

Brown told reporters: "At this time of uncertainty, we want British banks to be able to lead the world and to be as strong and as well-capitalised as any across the globe.

"The government will not be a permanent investor. Over time we intend to dispose of all these investments in an orderly way.

"In the meantime, our shares will be held at arm's length."

He said he anticipated eurozone countries making similar announcements in the coming days and "warmly welcomed" their willingness to take co-ordinated action.

"The events of the last few weeks have made clear once and for all that these are global problems that require global solutions," he said.