BRITISH BANKING CRASH ...

Royal Bank of Scotland Group Plc slumped by the most in two decades in London trading on concern the government may have to take full control of the bank after forecasting the biggest loss ever reported by a U.K. company. The stock dropped 67 percent, the most since September 1988, to 11.6 pence, paring the Edinburgh-based lender's market value to 4.6 billion pounds ($6.7 billion).
RBS said it may post a loss of as much as 28 billion pounds this year, surpassing Vodafone Group Plc's 22 billion- pound net loss in 2006. The government offered to exchange its preference shares in the bank for ordinary stock, a move that could increase its stake to 70 percent from 58 percent. Analysts speculated today the government may eventually take full control of the 282-year-old Scottish lender.

RBS has been crippled by former Chief Executive Officer Fred Goodwin's 14.3 billion-euro ($19 billion) acquisition of ABN Amro Holding NV's investment banking assets three months before the credit crisis began. Goodwin was ousted in October. The numbers are truly horrible, the British government is very clearly in the driving seat, and I would expect RBS to shrink back to being a more U.K.-focused bank.

RBS said it expects to post 8 billion pounds of credit market writedowns for the full year, boosted by losses on U.S. collateralized debt obligations. Credit impairment losses may total as much as a further 7 billion pounds, including a 1 billion-pound loss on its loan to bankrupt chemical maker Lyondell Chemical Co. RBS issued its statement on the same day that the Bank of England announced measures worth an additional 100 billion pounds to help banks access liquidity and boost lending. The package is on top of the 250 billion pounds Brown pledged in October.

We have a clear view that British banks like so many other entities are on the way down, some will even declare bankruptcy ... the next to face serious problems are Lloyds, the U.K.'s biggest mortgage lender !!! Lloyds are resisting for as long as they can, but I suspect in due course they will be majority government-owned due to rising bad debts on the back of a deterioration in the U.K. economy....