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£500Bn state pledge for RBS and Lloyds

The Government could be guaranteeing over £500bn-worth of Lloyds and RBS assets in its new asset guarantee scheme.

RBS last week revealed record losses of £24.1bn, made up of goodwill writedowns as a result of its ABN Amro acquisition and market and impairment losses. It also revealed that it will submit £325bn of assets to the guarantee scheme.

It will bear the first £19bn of losses and the Government would bear a further £13bn of losses on its behalf. RBS has pledged to lend £25bn in business loans and mortgages in 2009 as part of the exchange.

Speaking at last week’s Treasury select committee, Bank of England governor Mervyn King said that as a result of continuing Government intervention, RBS was effectively nationalised.

He said:”It can be argued now that the Government owns more than 50 per cent of the equity of the bank. I do not see a significance difference between that and outright nationalisation.”

Lloyds Banking Group set out its 2008 results, detailing losses of £10.8bn mainly due to the acquisition of HBOS. Profits fell by 80 per cent to £807m.

It has admitted it is in talks with the Government concerning its participation in the asset guarantee scheme and could ask for guarantees for as much as £250bn of its assets.

City minister Lord Myners said scheme deals were to be bespoke and would differ from bank to bank.

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