British banks set for 40 billion pound rescue

By John Bowker and Ralph Gowling

LONDON (Reuters) - Britain could pump more than 40 billion pounds into four troubled major banks and take big stakes as part of a recapitalisation due to be unveiled on Monday, sources familiar with the situation said.

Royal Bank of Scotland, HBOS, Lloyds TSB and Barclays were in line to receive the billions of pounds from investors and taxpayers to boost their capital to prepare them for tough economic times ahead, said the sources, declining to be named.

Talks among the banks, government officials and regulators were due to go on through the early hours of Monday to determine how much each would need from the 50 billion pounds offered by the government last week to offset the global credit crunch.

An announcement was expected before markets open on Monday, but details were still being fine-tuned, said the sources.

Royal Bank of Scotland Group may take over 15 billion pounds, HBOS about 10 billion, Barclays may seek over 7 billion and Lloyds TSB about 5 billion, according to industry sources and media reports.

The banks are expected to try and sell shares to existing investors, backed by the government, which would buy the shares not taken by investors.

That could result in the government becoming the biggest shareholder, and even a majority investor, in Royal Bank of Scotland and HBOS.

The government could take seats on the boards of banks, a government source said on Saturday.