RBS biggest victim of bank turmoil

4:49pm Tuesday 7th October 2008

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Royal Bank of Scotland was the biggest victim on another day of turmoil for banks amid mounting speculation that the Government is set to spend billions on a taxpayer-funded rescue of the ailing sector.

RBS was down 40% at one point - with big falls for HBOS, Barclays and Lloyds TSB - following crisis talks with Chancellor Alistair Darling on Monday night.

But in an attempt to calm market nerves, RBS said: "Contrary to press speculation, RBS did not make a request to Government for capital."

Meanwhile, savers with internet bank Icesave were warned that they are likely to have to claim their money from depositor compensation schemes.

The Financial Services Authority said it expected the Icelandic authorities to put the firm into insolvency proceedings, which would trigger payouts from the UK's and Iceland's saver protection schemes.

The warning came after Icesave stopped consumers withdrawing money from their internet accounts after its parent company Landsbanki was placed into receivership this morning.

RBS's stock slumped after Sir Fred Goodwin and his rival bosses at Barclays and Lloyds TSB met Chancellor Alistair Darling on Monday night - with a possible capital injection for the sector reportedly on the agenda. The concerns caused a fresh spike in money markets as fearful banks refused to lend to each other.

Meanwhile, New York mayor Michael Bloomberg said that international leaders must work together to tackle the global financial crisis.

After breakfast talks with Prime Minister Gordon Brown in Downing Street, Mr Bloomberg criticised the unilateral actions of some governments.

Referring to Mr Brown, the New York mayor said: "He's got a tough road to hoe, representing the UK, representing Europe, representing the world. All of these leaders have to work together. This is a crisis that no one country can solve on their own."

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