An extra £39bn for RBS and Lloyds - but will it work?

After giving £37bn to Lloyds and RBS last year to keep them afloat, the government is this week making another £39bn available - most of it to RBS.

It's "groundhog day" in the banking sector, as Sean O'Grady put it in The Independent. Last October, the government injected £37bn into Lloyds and RBS to keep them afloat. This week it has made another £39bn of capital available. Most of the money will go to RBS now the world's biggest-ever government rescue taking its total to as much as £53.5bn of taxpayers' money.

RBS is getting £25.5bn to strengthen its balance sheet and may draw on another £8bn if it needs to. It will keep £282bn of loans in the government's Asset Protection Scheme (APS), which insures banks against losses on risky assets in return for a fee. Lloyds has been allowed to leave the APS, but will raise capital through a £13.5bn rights issue a UK record to which the government will contribute £5.7bn. The government's stakes in Lloyds and RBS will remain at 43% and rise to 84%, respectively.

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