Small shareholders protest at bank rescue terms

15 October 2008

The terms on which the government has taken stakes in several major banks as part of its bail-out plan for the banking system have angered small shareholders.

Shareholder groups have complained about the restrictions placed on dividend payments that have been imposed in return for the huge sums of public money that are being pumped into the banks to stabilise their capital and lubricate lending.

The UK Shareholders’ Association (UKSA) argued that the terms of the rescue package are punishing those shareholders who have already supported rights issues earlier in the year.

A particular complaint centres on the 12 per cent interest charged on the government-owned shares in the banks.

Roger Lawson, of UKSA, said: “How can a bank make a profit when it is charged 12 per cent on the preference shares offered by the government? The government seems to be anticipating that the UK is going into a recession the like of which we have never seen before and all our banks are going to go bust. That is plainly ridiculous.”

Mr Lawson said he had received several hundred emails from shareholders who have described the 12 per cent interest rate as punitive and far in excess of the 5 per cent originally mooted.