Government to launch banking rescue

LONDON (Reuters) - Britain will launch its biggest retail bank rescue on Monday when the four largest, HBOS, Royal Bank of Scotland, Lloyds TSB and Barclays, ask for a combined 35 billion pound lifeline, the Sunday Times reported.

The unprecedented move would make the government the biggest shareholder in at least two banks, HBOS and Royal Bank of Scotland, the newspaper said on its website. It did not give a named source for its information.

Spokesmen for all four banks declined to comment on the report and government officials were not immediately available.

Chancellor Alistair Darling, attending a G7 finance ministers' meeting in Washington, said on Saturday the government was to give more details early this week about its already announced 400 billion pound banking rescue plan.

The Sunday Times said the scale of the fund-raising could lead to trading at the London Stock Exchange being suspended to give the market time to digest the impact.

A spokesman for the stock exchange told Reuters on Sunday: "My information is that the market will open on Monday."

The Sunday Times said Royal Bank of Scotland, which has seen its market value fall to below 12 billion pounds, was to ask ministers to underwrite a 15 billion pound cash call.

HBOS, Britain's biggest provider of mortgages, was seeking up to 10 billion pounds, Lloyds TSB, in the process of acquiring HBOS in a rescue merger, wanted 7 billion pounds, and Barclays needed 3 billion pounds, the newspaper said.

It said one consequence of the fund-raising might be that Lloyds TSB could renegotiate the terms of the HBOS takeover, although both sides were still keen for the merger to go ahead.