Bailout to take big stakes in RBS and HBOS

By Jodie Ginsberg and Steve Slater

LONDON (Reuters) - The government waded in with 37 billion pounds of taxpayers' cash to bail out three major banks on Monday, in a move that could make it their main shareholder.

In return for the public money, the banks will be forced to curtail the bonuses that many believe encouraged a risk-taking culture that precipitated the global financial crisis. They will also have to scrap dividends.

Under the plan, Royal Bank of Scotland (RBS.L: Quote, Profile, Research) will boost its capital by 20 billion pounds, issuing 15 billion pounds' worth of shares underwritten by the state, and 5 billion pounds in preference shares directly taken by the government..

HBOS (HBOS.L: Quote, Profile, Research) and Lloyds TSB (LLOY.L: Quote, Profile, Research) will also participate in the scheme "upon successful merger"..

Chancellor Alistair Darling said extreme times called for extreme measures and that he was prepared to make even more money available if necessary.

"It's necessary because we are going through quite extraordinary circumstances the world over, and I'm determined to do everything we can to stabilise our banking system and make it stronger," he said.

"And in return for it, of course, there will be restrictions on what happens in boardroom pay, and we're also getting guarantees in relation to increased lending to businesses, as well as to mortgages."

EUROPE ACTS  Continued...