Barclays and Lloyds shares plummet amid bailout talks

This morning, Barclays saw its shares plummet almost 10% prior to talks with the Government with regard to a taxpayer bailout.

According to a report in the Guardian, Barclays is set to hold talks with the Government with regard to taking part in its Asset Protection Scheme, which insures against losses arising from toxic assets.

Royal Bank of Scotland (RBS) and Lloyds Banking Group have already agreed to take part in the scheme. However, shares in Lloyds also plummeted by 15% in early trading today after analysts expressed their disappointment about the fee Lloyds had paid to take part in the scheme.

David Buik of BGC Partners told the Guardian that “The market perceives that on a pro-rata basis Lloyds has paid far more for its Asset Protection Scheme - about 5% against RBS’ 2% - a cost of £15.6 billion. This is perceived as disastrous for shareholders.”

So far Barclays has rejected financial assistance from the Government, opting to go it alone last year by raising £5.3 billion from investors in Qatar and Abu Dhabi, who took a combined stake in the bank of over 30%.

Meanwhile, the FTSE 100 was hovering around the 3500 mark after Barclays and Lloyds shares lost ground. Other contributors to the heavy falls this morning on the FTSE are HSBC, which lost 10% in its share price to 324p - its lowest point in over 13 years, while RBS fell 4%.

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