Is No Nationalisation a Good Move?

According to Prime Minister Gordon Browns’ spokesman, the government does not intend to nationalise Lloyds bank.

This comes after the Lloyds Banking Group shares were reported to have fallen 20% after Friday mornings announcement of huge losses of £11 billion for 2008 at fellow bank HBOS. Trade later recovered by 0.16%.

The bank is owned primarily by the government (43%) and the slump raised worries it could need more government funding or be nationalised, but today the government is saying it was giving “no active consideration to nationalising Lloyds.”

No Regrets…

The spokesman also added that the Prime Minister had no regrets about allowing the merger between Lloyds and HBOS, but rather still believed that the merger was in the interest of the stability of the financial system in general.

Mondays trading at the bank was also unpredictable and caused shares to fall further into the negative figures, possibly caused by rating agency Moody’s downgrading their rating on Lloyds’ bank deposit and senior debt ratings.

Moody’s said: “the high level of troubled and higher risk exposures within HBOS,” therefore weakening the profitability of the whole group as the reason for its decision.

The government has already put £17 billion into the banking group, but some analysts are questioning their decision to take over HBOS and believe that, like Northern Rock, it needs to be nationalised.

Stephen Timms, Financial Secretary to the Treasury, said that at the moment, the government was not contemplating putting more money into Lloyds.

He said: “I am confident that, in the long term, this [Lloyds] is going to be a strong and successful commercial operation,” adding that the government would “take whatever action is needed to secure long-term stability in the financial system.”

Outrage Over Staff Bonuses

It was discovered that over the weekend, Lloyds intended to reward its staff with bonuses of up to £120 million, saying its employees deserved “financial recognition” for hitting targets.

Though they have been criticised by investors and politicians for rewarding failure after the government bail-out plans. Both the current government and the Tories have said that bank executives should not receive bonuses, but lower salary staff should.

The five Lloyds executive directors have all agreed to voluntarily give up their bonuses from 2008.

Last week MPs questioned key British bank bosses and former bosses about the financial crisis and their role in it. As a result of this, the previous bosses of HBOS and the Royal Bank of Scotland, who have been worst affected by the economic slowdown, were said to have apologised “profoundly and unreservedly” for their banks failure.

What Do You Think?

Should Lloyds be nationalised? Is there a better way forward the government should consider? Is it fair for any bank executives to get bonuses? What else do you think those bonuses could be spent on for the better? Leave your comments here.