HM TREASURY News
Release (PN 114/08) issued by COI News Distribution Service. 3
November 2008
Arrangements for
managing the Government's shareholding in banks subscribing
to its recapitalisation fund were announced today by Chancellor of
the Exchequer, Alistair Darling.
The Government's investments will be managed on a commercial
basis by a new arm's-length company, 'UK Financial
Investments Limited' (UKFI), which is wholly owned by the
Government. Its overarching objectives will be to protect and
create value for the taxpayer as shareholder, with due regard to
financial stability and acting in a way that promotes competition.
UKFI will work to ensure management incentives for banks in which
it has shareholdings are based on maximising long-term value and
restricting the potential for rewarding failure. It will also
oversee the conditions of the recapitalisation fund, including
maintaining, over the next three years, the availability and
active marketing of competitively-priced lending to home owners
and small businesses at 2007 levels.
Membership of the UKFI Board will comprise a private sector
Chair, three non-executive private sector members, a Chief
Executive and two senior Government officials from HM Treasury and
the Shareholder Executive. Sir Philip Hampton has agreed to become
the UKFI's first Chair and John Kingman will become Chief
Executive. Both will take up these positions shortly. The
remaining private sector board members will be recruited
expeditiously. These roles will be filled by individuals of
relevant commercial skill and experience to enable UKFI to best
meet the objectives set out above.
In due course, the Government intends that UKFI will manage its
investments in Northern Rock plc and part of Bradford &
Bingley. These companies will continue to have their own
independent Boards and management teams, determining their own strategies.
In addition to the recapitalisation fund and the credit guarantee
scheme, the Government will continue work to ensure that all
lenders do everything they can to support homeowners and small
business during this period of financial market turbulence.
Notes for Editors
1. The Government will be underwriting capital investments for
RBS and, upon successful merger, HBOS and Lloyds TSB, totalling
£37 billion.
2. All three institutions subscribing to the Government's
bank recapitalisation fund will be seeking shareholder approval
for raising their capital levels before the end of the year. The
Government will then take shareholdings in these banks on the
terms agreed on 13 October, subject to take up by existing or new
shareholders of the ordinary shares and, in the case of HBOS and
Lloyds TSB, to the merger going ahead.
3. Consistent with the agreements reached with the companies,
UKFI will work with the Boards to strengthen their membership
through the appointment of suitably qualified, independent
non-executives. Final decisions will be taken by the relevant
company Boards.
4. UKFI will support management incentivisation based on
long-term value maximisation, which attracts and retains high
quality management and which restricts the potential for rewarding
failure. UKFI will also oversee the conditions attached to
subscribing to the Government's recapitalisation fund,
including maintaining, over the next three years, the availability
and active marketing of competitively-priced lending to home
owners and small businesses at 2007 levels.
5. The Government will not be a permanent investor in UK
financial institutions and will over time seek to dispose of the
investments in an orderly way, through sale, redemption, buy-back
or other means, in accordance with the UKFI's objectives.
6. Sir Philip Hampton was appointed Chairman of Sainsburys in
July 2004. He was Group Finance Director of Lloyds TSB Group plc
from 2002 to 2004, Group Finance Director of BT Group plc from
2000 to 2002, and has held a number of other Finance Director
positions. In the 2004 Budget Philip Hampton was asked to lead a
review of regulatory inspection and enforcement. This review
produced the Hampton Report , which informed the subsequent
Regulatory Enforcement and Sanctions Act 2008.
7. John Kingman is Second Permanent Secretary and Managing
Director, Public Services & Growth, HM Treasury. Previous
roles in the Treasury have included Managing Director, Finance and
Industry and Director of the Enterprise & Growth Unit. John
has worked on the Lex column of the Financial Times and in the
Group Chief Executive's office at BP. He has also been a
Board Director of the European Investment Bank, a non-executive
director of Framestore CFC Ltd, and a Visiting Fellow at the
Institute of Political and Economic Governance at Manchester University.
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