Taxpayers could hinder bailout banks' foreign plans

State-owned banks will struggle to compete in foreign markets because of the political fallout among taxpayers at home, HSBC's investment banking boss said today.

Banks such as Lloyds and Royal Bank of Scotland, which are largely owned by the Government, have already run into criticism for running up losses abroad. Opposition politicians have argued that it is not fair to risk taxpayers' money on overseas ventures when British consumers and businesses are in desparate need of credit.

HSBC's Stuart Gulliver said: "State-owned banks can't compete in states other than their own. Governments have electorates, and want to see money being put to use in their own country."

He said the bailouts of banks around the world would benefit those who had avoided them, and named HSBC, Standard Chartered, JPMorgan Chase and BNP Paribas as those with the most to gain.

Gulliver was speaking as Lloyds' plans for reducing its reliance on the state-backed "toxic" debt insurance scheme were being stress-tested by the Financial Services Authority. Lloyds plans to raise capital through a rights issue so it can cut its involvement in the asset protection scheme below the £260 bilion agreed.