Britannia Radio

This is vital because if there are no dividends the Treasury will 
never any of its money back.  Quite apart from the EU telling a proud 
people in effect that 'we say, you've lost your money; now be quiet 
and do as you're told'.  The deals may well fall through for this 
reason.

If that were to happen bank recovery would grind to a crawl and RBS 
and HBOS would fail while Lloyds-TSB might scrape through along with 
the stronger HSBC, Barclays, and  Abbey  with other institutions like 
Nationwide  etc .  Apartr from illustrating our total loss of 
independence it also shows that the EU hasn't a clue what it's 
doing.  Ye Gods!
  Guardian
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TELEGRAPH   17.10.08

EU bans bail-out bank dividends for five years
Robert Winnett The Daily Telegraph

The European Commission banned banks taking part in Gordon Brown's 
emergency bail-out from paying dividends to shareholders for up to 
five years, it was disclosed yesterday.

The intervention by Brussels officials threatens to deny investors 
significant income and could threaten the Government's scheme.

The banks are now in urgent discussions with the Treasury to 
renegotiate the terms of the bail-out. There are fears that the 
European stipulation could lead to the collapse of the Lloyds TSB-
HBOS mer-ger.

The issue is crucial as banks need to pay dividends to attract 
private investors. Pension funds rely on the payment of dividends for 
returns. John McFall, the Labour MP and chairman of the Commons 
Treasury select committee, said dividends should be paid. "The 
Government wants the first cut for the taxpayers, and they don't want 
anything to get in the way, but if we are to have confidence in 
financial companies then we have to ensure that dividends are paid to 
make it attractive for investors to come in,'' he said.
"Because if investors don't come in then the Government will own even 
more, so we've got to get this balance.'

Under the scheme unveiled by Mr Brown the Government will buy 
"preference'' shares in at least three banks - Lloyds TSB, RBS and HBOS.
The preference shares are different from ordinary shares as the banks 
must pay a fixed rate of interest to the holders of the shares - in 
this case the Treasury. The rate of interest has been set at 12 per 
cent - higher than normal - which ministers hoped would mean the 
scheme did not fall foul of competition laws. The preference shares 
cannot be repaid for at least five years.

When announcing the scheme on Monday, the Government initially said 
that dividends may not be paid until the preference shares were 
repaid. However, after banking shares fell it was claimed that the 
Treasury had "clarified'' the deal and that the dividend suspension 
could be renegotiated after a year.

However, the European Commission has ruled that the bail-out can 
proceed only if dividends are banned until the preference shares are 
repaid.

Jonathan Todd, a spokesman for the commission, said: "The commission 
wanted to ensure that there was a strong incentive for the banks to 
repay the state as quickly as possible.
"We did not consider that applying a penal interest rate would be 
sufficient to achieve that.''

He added: "Initially the UK Government thought the penal interest 
rate would be sufficient disincentive for the banks. We insisted that 
the payment of the dividends should be suspended while the state 
still had the preference shares.''

Mr Todd also claimed that the Government had agreed last weekend to 
the Commission's terms.