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UK govt advisers working on plan to cut stakes in banks

UK government advisers are working on a "secret plan" that could allow the state to begin slashing its stakes in British banks, says a media report.

world Updated: Mar 28, 2010 15:21 IST

UK government advisers are working on a "secret plan" that could allow the state to begin slashing its stakes in British banks, says a media report.

"Advisers to the government are working on a secret plan that could allow the state to start cutting its shareholdings in British banks just weeks after the general election," The Sunday Times said.

The report noted that the plot would see the UK Treasury create convertible gilts, which are government bonds that could be exchanged for shares in the banks once certain price targets are met.

"It is understood that a sale of the new instruments could be launched as early as June, if officials decide to press ahead with the plan," the publication added.

The British government had pumped in billions of pounds into the country's banks, including the Royal Bank of Scotland (RBS), to help them tide over the financial crisis. In return, the government had bought stakes in these entities.

In recent weeks, there has been speculation that the government could sell bank stakes, after strong increase in share prices of RBS and Lloyds Banking Group.

"Although the bond sale would not instantly reduce the government’s stakes, it would provide the start of an exit for the taxpayer. Under the plan, the shareholdings would gradually be reduced over a period of five years," the report said.