HM Treasury

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06/09

19 January 2009

Treasury statement on restructuring its investment in RBS to deliver further bank lending to industry and homeowners

With continuing instability in the global financial markets, expected to be demonstrated by a run of poor financial results from the industry, the Government is today taking action, building on the comprehensive set of measures it announced on 13 October, to adjust its commercial investments in the Royal Bank of Scotland Group plc (RBS) to stabilise further its position and ensure it has the tools to enhance its contribution to the long term strength of the economy.

The Government, in consultation with UK Financial Investments (UKFI), has today agreed to convert the Treasury’s preference share investment in RBS to ordinary shares, with the aim of: supporting stability in the financial system; ensuring continued protection for ordinary savers, depositors, businesses and borrowers; and maintaining a safeguard of the interests of the taxpayer. In summary, this action is intended to:

The Treasury, Bank of England and Financial Services Authority have continued their detailed discussions with the institutions that participated in the recapitalisation scheme last year. These institutions committed in aggregate to strengthen their total tier 1 capital, either through their own actions or, where requested, through additional support from the Government by increasing or restructuring the preference and ordinary share capital.

The Government is not injecting new money into RBS.

As part of its agreement, the Government has agreed with RBS commitments including:

UKFI will continue to manage the Government's shareholdings in the recapitalised institutions on a commercial arms-length basis and with the aim of realising value for the taxpayer.  Consistent with the Government’s aim that it should not be a permanent investor in UK financial institutions, UKFI will develop and execute a strategy for disposing of the shareholdings in an orderly way.

The measures the Government is announcing today support stability in the wider financial system, and protect the interest of taxpayers, depositors and savers.

Notes for editors

1. This press notice is not an offer for sale of the ordinary shares to be issued pursuant to the  restructuring in the United States or any other jurisdiction. The ordinary shares to be issued pursuant to the restructuring have not been registered under the U.S. Securities Act of 1933, as amended (the "Securities Act") and may not be offered or sold in the United States absent registration or an exemption from the registration requirements of the Securities Act. There is no intention to register any part of the ordinary shares to be issued pursuant to the restructuring in the United States or to conduct a public offering of securities in the United States.

2. Guidance on HMT Treasury Credit Guarantee Scheme and Bank Recapitalisation Fund

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