RBS shares fall 39% on talks of govt injecting $87 bn

Shares in Royal Bank of Scotland Group PLC plunged 39 per cent in early trading on Tuesday, as investors worried the British government is not doing enough to boost banks' balance sheets in the financial crisis.

Treasury chief Alistair Darling and Bank of England Governor Mervyn King met on Tuesday with the heads of Britain's biggest banks, according to two people familiar with the situation, who requested to remain anonymous because of the confidential nature of the meeting.

The talks, which included RBS's chief Fred Goodwin and Barclays PLC's John Varley, addressed possible government plans to inject as much as 50 billion pounds ($87 billion) in banks in order to shore up their balance sheets and restore confidence in the institutions.

However, the government did not go so far as to give details of how much or when the plan would come into effect, the sources said.

As a result, shares at other British banks began falling as soon as the London Stock Exchange opened on Tuesday morning. RBS' shares were hit the hardest, after having its credit rating downgraded by a leading credit agency on Monday, with falls of 39 percent to 90 pence (US$1.56). Financial regulators halted trading in the shares.

Source: EconomicTimes