British bank plan on tap

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NEW YORK (CNNMoney.com) -- Battered British banks, along with the United Kingdom Treasury office, are expected to unveil details of a massive capital raising plan early Monday, according to The Wall Street Journal, citing people familiar with the situation.

On Sunday night, the paper reported that the British government was close to a plan to take control of the Royal Bank of Scotland, injecting at least 15 billion British pounds ($25.5 billion).

Last week, the British government said it would make $87 billion available to the nation's eight largest banks in an effort to shore-up their capital positions. In return for the infusion of capital the British government will receive preferred shares of those banks.

In addition to RBS, affected institutionss include Barclays and HBOS, a mortgage lender.

The announcement last week came a day after the U.K. Treasury teamed up with five central banks around the world to cut interest rates in an effort to bolster global economies.

"A healthy banking system is the cornerstone of the economy. But many banks, all over the world, don't have sufficient capital," British Finance Minister Alistair Darling said after the rate cuts were announced. "What started in America, last year, has now spread to every part of the world. And I've made it clear that we will do whatever is necessary to maintain stability."

The government has already moved several times to increase the amount of long-term funding it is providing to banks under a special liquidity plan announced in April. The amount, which has totaled over $176 billion year to date, was recently increased to upwards of $350 billion.

According to the Journal, the rout on Wall Street was responsible for pushing the U.K. to speed up the announcement, with at least some banks expected to say by Sunday how the capital will be raised.

Nothing is set in stone, however, including Monday's deadline.

Under the plan, the banks will be required to raise an additional £25 billion ($42 billion) by year end, according to the U.K. Treasury Web site. The institutions can either raise the funds through private investors or through the British government.

RBS and HBOS are considered the two most likely to seek the funds from the government, said the Journal, according to people familiar with the situation and analysts that cover the two banks. The paper also said RBS Chief Executive Fred Goodwin has intimated that he would step down if that's what it takes to shore up the bank's financial position.

A person familiar with the U.K. Treasury's plan told the Journal that an injection of taxpayer money would most likely lead to talk of executive departures, including Mr. Goodwin.