Govt pumps £37bn into three banks

Gordon Brown has called a plan to inject £37bn into three struggling high street banks as "unprecedented" while announcing a clampdown on bonuses and dividends.

The Government confirmed this morning that it will inject £20bn of taxpayers' money into the Royal Bank of Scotland (RBS) while a further £17bn will be pumped into both HBOS and Lloyds TSB following a merger of the two banks. Barclays will raise £6.5bn without government backing.

At a press conference this morning the Prime Minister said the rescue package would involve far-reaching reforms for the affected banks. He said that no bonuses for board members or dividends will not be paid out in the near future. Only "long-term successes" would be rewarded, he added.

Among the casualties of the shake-up are RBS chief executive Sir Fred Goodwin, who is standing down. HBOS chief executive Andy Hornby and chairman Lord Dennis Stevenson are also to step down from their posts. RBS chairman Tom McKillop is to retire.

The bail-out was "unprecedented but essential", Brown said this morning. "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."