The UK Treasury is considering offerering pension funds and other City investors the chance to buy lucrative preferred shares in key banks to reduce the public cost of its bailout plan, reports The Times. Officials at the Treasury are considering whether to allow financial institutions access to the £9bn of high-yielding preference shares that the government is buying as part of its £37bn bailout of RBS, HBOS and Lloyds TSB. The preference shares pay 12% a year and the idea is to allow City fund managers to buy some in the hope that they will be encouraged to purchase further ordinary shares in the three stricken banks. Under the original plan, the government was to take on all the preference shares, leaving ordinary shareholders with stock that paid little or no dividend. Ministers initially indicated that the banks would not be allowed to pay any dividend while the preference shares were outstanding, but now it appears to have recognised that its stand was too draconian. A Treasury spokesman confirmed Sunday that a wider approach was being considered

This entry was posted by Gwen Robinson on Monday, November 17th, 2008 at 5:33 and is filed under Capital markets. Tagged with hbos, lloyds tsb, rbs. Edit this entry.