Ailing Royal Bank of Scotland will be propped up with another huge taxpayer handout worth up to £25.5 billion after posting the biggest loss in UK history.
The bank - already 70% state-owned - took a step closer to full-scale nationalisation as it announced plans to dump £325 billion in toxic debts into a Treasury-backed protection scheme.
RBS's record annual loss of £24.1 billion came amid a storm over the pension of the former chief executive blamed for the damage, Sir Fred Goodwin. Prime Minister Gordon Brown said he was "determined" to act over the £693,000 retirement package, threatening legal action if necessary.
The row overshadowed the latest huge injection of public funds to shore up the beleaguered bank's finances and signals that around 20,000 staff could face the axe.
RBS will issue £13 billion in special 'B' shares to the Government, as well as a further £6.5 billion to take part in the Asset Protection Scheme (APS).
The bank, which has already taken £20 billion in public funds under the first banking bail-out last October, can call on a further £6 billion if needed.
The Government's voting shares will be capped at 75%, but its economic interest in RBS - its claim on RBS's assets - could rise to 95% depending on its future performance, chief executive Stephen Hester said. "The economic stake could be anywhere from 75% frankly all the way up to 95%," he added.
Chancellor Alistair Darling defended the APS amid fierce criticism: "While the taxpayer does face risks as a result, the cost of doing nothing is far greater." He added: "It is essential to restore confidence in the banks, to allow them to clean up and rebuild and get lending going again."
But shadow chancellor George Osborne said: "The British taxpayer is insuring the car after it has crashed, and the sad truth is that it is families up and down the country who are paying the price."
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Liberal Democrat Treasury spokesman Vince Cable described the proposal as a "disgrace" and "a total betrayal of the British taxpayer".
