UK Official Rejects Bank Nationalization

British Treasury minister Paul Myners spoke out against bank nationalization on Thursday, saying the government wanted to support a return to an effective commercial banking sector.

Sharp falls in the bank share prices led the chairman of the British parliament's Treasury Committee to urge the government on Wednesday to nationalize Royal Bank of Scotland and Lloyds Banking Group.

But Myners, the minister responsible for the City, London's financial district, said the public sector could not match the capacity of soundly managed banks and markets to support wealth generation.

"That is why the government has a policy of supporting a return to an effective commercial banking sector, rather than nationalization," he wrote in an article for the Financial Times.

Sharon Lorimer

"Our goal is to support the economy by removing the barriers to lending and restoring an effective, commercial and privately owned banking system," he said.

The government, which injected 37 billion pounds ($51 billion) into banks in a first rescue package last October, unveiled a second bank rescue plan this week, but it has failed to reassure investors.

The government owns 43 percent of Lloyds Banking Group and raised its stake this week in Royal Bank of Scotland to 70 percent.

Earlier in the crisis, it was forced to nationalize mortgage lenders Northern Rock and Bradford & Bingley.

The Daily Telegraph and Times newspapers reported on Thursday that any attempt by Barclays to raise extra capital could trigger a clause that would deliver control of the bank to Middle Eastern investors.

Barclays opted to raise funds privately last year rather than take part in the British government bailout.

Qatar's sovereign wealth fund and Sheikh Mansour Bin Zayed Al Nahyan, a brother of Abu Dhabi's ruler, invested up to 5.3 billion pounds in the bank.

According to The Daily Telegraph, a clause in the agreement states that if at any time before the end of June Barclays raised more capital at a price lower than 153.276 pence per share, the Middle Eastern investors could take their stake at that lower level.

At Wednesday's closing share price of 66 pence, that would give them a majority stake in the bank, it said.

The Times said this clause made it practically impossible for the government to take a meaningful stake in Barclays -- unless it paid more than 153 pence for the shares.

• Commentary: UK Plays Market Whack-a-Mole

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