INSTANT VIEW: UK banks to take $64 billion in government funds

LONDON (Reuters) - Three major British banks could take 37 billion pounds ($64 billion) in government money to boost their capital, the British government said on Monday.

Royal Bank of Scotland will boost its capital by 20 billion pounds, while LLoyds TSB and HBOS, who announced revised terms for their planned merger, will take 17 billion pounds between them.

Barclays is not taking government money but said it would raise cash from investors and not pay a final dividend.

PRIME MINISTER GORDON BROWN

"I spoke to President (George W.) Bush last night after returning from Paris and we agreed the common ground for action in our two continents.

"I believe that only by global action can we fully restore the confidence that is needed and build the international financial order. And I will put forward proposals for major reform of the international institution at a speech in the City (of London) later this morning."

JONATHAN LOYNES, CAPITAL ECONOMICS

"The injections into some banks like RBS and HBOS are big enough to mean that it is very likely that they will be treated as fully nationalized for the purposes of the public accounts, thereby adding their liabilities, less liquid assets, to the published level of public sector debt. This would push the debt to GDP ratio well above 100 percent.

"... public borrowing and debt are already set to rise sharply as a result of the slowdown in the economy already seen. These extra developments merely increase the likelihood that, at some point in the future, very heavy tax increases or spending cuts will be required to get the public finances back into a sustainable position."

GOLDMAN SACHS ANALYSTS

"The coordinated European response to the credit crisis presented on Sunday evening should be positive news for the European banks sector, in our view, as it addresses the central issues of both capital and funding in a comprehensive way.

"On a more systemic level, the scope of the government intervention should send a strong signal to market participants and pave the way for lower systemic tail-risk.

KEITH BOWMAN, EQUITY ANALYST, HARGREAVES LANSDOWN

"Confidence in the banking sector has been shaken to its roots, with the result that government's traditional role as lender of last resort and back stop to the financial sector is being implemented on a scale unimaginable just weeks let alone months ago.

"It is still too early to appreciate the ramifications of these moves. However, for now, the hope is that today will mark a watershed, with vast measures of government reassurance finally rekindling some confidence in the shattered banking sector."

FINANCIAL SERVICES AUTHORITY

"The FSA has no wish to become involved in setting remuneration levels: that is a matter for boards, which should ensure that they have effective structures in place to set remuneration policies and monitor remuneration levels throughout the firm.

"However we want to ensure that firms follow remuneration policies which are aligned with sound risk management systems and controls, and with the firm's stated risk appetite.

"It is difficult to be prescriptive about remuneration policies. They will vary widely between firms, and within firms between different levels of staff. They will also need to reflect many factors including the nature of the business undertaken and the culture of each institution.

"Nevertheless we believe that it is possible to set out some high level criteria against which policies can be assessed."

CREDIT SUISSE ANALYSTS

"Overall, we continue to believe that measures put in place by the UK Government, as well as the huge amount of liquidity being pushed into the system by the BoE are extremely useful for the sector. This is demonstrated in cash and credit markets.

"However, equity holders remain at risk from higher impairment charges and equity dilution. Valuations do not take sufficient account of this yet, in our view."

BRITISH FINANCE MINISTER, ALISTAIR DARLING

"It's necessary because we are going through quite extraordinary circumstances the world over and I'm determined to do everything we can to stabilize our banking system and make it stronger.

"And in return for it, of course, there will be restrictions on what happens in boardroom pay and we're also getting guarantees in relation to increased lending to businesses, as well as to mortgages too."

BERNSTEIN ANALYSTS

"The bail-outs will have a material fall-out for the European banks in the form of part or full nationalization, or alternatively from significant shareholder dilution as shareholders provide additional capital, and the required solvency ratios rise.

"There is also likely to be more severe regulatory pressure. Nevertheless, the banks should ultimately be able to earn their cost of capital, once the system has adapted to the new market environment.

(Writing by Dan Lalor)