RBS and HBOS are to be taken over as part of a government bailout of the banking sector.
The UK government is to take majority shareholdings in Royal Bank of Scotland (RBS) and Halifax Bank of Scotland (HBOS) in an effort to contain the financial crisis gripping the country, it has been announced.
The treasury said the move, which will effectively see the two organisations nationalised, is necessary to restore trust and confidence in the banking sector. It comes as part of a larger bailout plan that will see £50 billion of taxpayers' money injected into banks in return for shares.
Northern Rock and Bradford & Bingley have already been nationalised by the government. Following the latest move it will have four of the UK's biggest lenders under its control.
Government-appointed board members will be put in place at RBS and HBOS to ensure the banks once again begin lending to individuals and businesses. Lloyds TSB had planned to take over HBOS and there is some uncertainty over whether this deal will now go through.
Barclays has also announced plans to raise £6.5 billion privately to avoid seeking financial help from the government. If it is successful - and the Lloyds TSB-HBOS merger goes ahead - it will be the only fully-independent British-owned bank on the high street.
According to the BBC's business editor Robert Peston, today will be seen as "perhaps the most extraordinary day in British banking history". A number of other European countries are expected to announce similar bailout plans this week.
