U.K. taxpayers to own 95% of RBS?

British taxpayers’ ownership of the Royal Bank of Scotland could increase to as much as 95% as a result of the new deal between the bank and the government. The U.K. government agreed to insure 325 billion pounds ($462 billion) of the bank’s assets after RBS posted a 2008 net loss of 24.1 billion pounds which is said to be the biggest loss in British history.

Under the terms of the deal RBS is to pay the government 6.5 billion pounds for the insurance in the form of so-called B shares with no voting rights and a 7% annual dividend. Besides, the parties agreed that the government won’t charge certain tax benefits.

Apart from this the bank will also get an additional 13 billion pounds of capital from the U.K. Treasury through issuing more of the B shares. At that RBS can also select to increase that figure by additional 6 billion pounds.

At the moment the stake of the government in RBS is 70% after the authorities provided a 20 billion pound capital bailout in October. According to the bank CEO Stephen Hester the government’s voting rights won’t exceed 75%. Yet the economic stake of the government could potentially rise to achieve 95% mark which will depend on future losses and whether the bank selects to apply for more capital.

The agreement stipulates RBS to be responsible for the first 19.5 billion pounds of losses on the assets, which have a face value of 325 billion pounds and a carrying value of 302 billion pounds after write-downs that have already been taken. The government will then cover 90% of any further losses.

Additionally, RBS also agreed to increase its lending to homeowners and businesses by about 25 billion pounds in the next year.