State Owned RBS and HBOS
Written by A Forex View From Afar on Tuesday, October 14, 2008The U.K. Government has decided to inject up to 37 billion pounds ($64 billion) in a bailout for the country's biggest banks. Royal Bank of Scotland, HBOS and Lloyds TSB are the banks that will receive the cash injection, split into 20 billion pounds for RBS and 17 billion pounds for HBOS and Lloyds.
Therefore, the major shareholder of HBOS and RBS will become the U.K. Government, which will hold a 58% stake in HBOS and 60% in RBS. Furthermore, both banks will have Government controlled seats in the board. The actions taken lately clearly show that central banks are ready to step into the market and save the financial system. The markets are rallying today, aided by the actions taken by the central banks.
However, as in the last few days this has not been reflected in the currency market, yet. The yen, which indicates the market’s risk-awareness, is trading below the Asian session open price, while the European pairs are trading virtually flat since the Asian session opened, even though the trading range was quite large. All eyes are now on the Libor rates, to see if the money markets tensions come down to some degree.
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