With RBS expected to get $15Bn, that emphasizes the extent to which the British government are apparently going to support British banks.
State to save HBOS and RBS | Sunday Times
The scale of the fundraising could lead to trading at the London stock market being suspended. This would give time for the market to digest the impact of the moves.
Relevance to Bankwatch:
How will this $35 Bn capital injection into RBS, HBOS, Lloyds, and Barclays help the immediate problem of frozen interbank lending?
There are two problems with banks:
1) lack of capital to absorb bad loans
2) lack of confidence that manifests in frozen interbank lending
Capital injections will help 1) but not 2). Problem 1) impacts shareholders while 2) impacts consumers and businesses at large. Government responsibility should only be to 2) because interbank lending is directly associated with lending to consumers and businesses. The responsibility for 1) lies with shareholders. While taxpayers should not be responsible, the larger issue is that banks have no reason to avoid risk if the government bails them out.
I stand by my conviction that Gordon Brown is leading the other world leaders down a slippery path that will make matters worse, and potentially lead to complete bank nationalisation. I am sure that is not what he or other governments want. Why can’t they focus like a laser on the problem that affects consumer and commercial lending, which is the little understood, yet essential interbank lending market. A simple solution would be a categorical guarantee of interbank debts. That guarantee would be tied to covenants that the banks’ must meet. This would have infinitely greater power than free money for equity.
UPDATE:
As details come out, the guarantee of interbank lending is on the cards. This from ft.com
It [Germany] will issue up to €400bn in credit guarantees for inter-bank lending and set aside a €100bn fund to inject capital in financial institutions and acquire illiquid assets. France meanwhile said it would guarantee up to €320bn in inter-bank loans and provide €40bn in new capital for banks.
UPDATE2:
The combined value of European support is closing in on $3 trillion.
European governments on Monday pledged a total of €1,873bn ($2,546, £1,465) as part of co-ordinated plans to shore up their financial sectors, sparking sharp rallies across the continent’s stock markets.
Bankwatch 
Don’t you think one and two are related though? Bank’s won’t lend to other banks because they fear that they are undercapitalized. They are unable to determine the true value of some of their assets and therefore unable to determine the risk associated with lending to them.
Thus captial injections could help if it makes it easier to for banks to determine the health of their lending partners.
@Joey … agree they are related. It occurs to me it is useful to consider them separately as well as together. For example it might be easer to form some time of government guarantee on interbank lending which could have greater impact on freeing liquidity than stakes in banks. Taking stakes in banks seems to raise many other issues, and I am not sure in and of itself that will free up the interbank markets.
Another thought, is that whatever actions are taken I can forsee a premium interbank market opening up with exclusive membership of trusted, government owned banks, and the rest.