Page last updated at 17:20 GMT, Friday, 16 January 2009

New chairman to take over at RBS

RBS branch
The government holds a 60% stake in Royal Bank of Scotland

Sir Philip Hampton, the chairman of Sainsbury, is to take over at the Royal Bank of Scotland, the BBC has learnt.

Sir Philip has agreed to take the post of chairman - after RBS's problems led to the resignations of the bank's senior management.

He will replace Sir Tom McKillop as head of the partly nationalised bank.

Ministers are currently working to put in place measures to improve funding for the banks, and to limit losses from the bad loans they have made.

Sir Philip will become deputy chairman and chairman-designate on Monday, then when Sir Tom McKillop steps down at the bank's annual general meeting in April, he will become chairman.

Sub-prime exposure

Last year, as the financial crisis hit banks' worldwide, the UK government took a near-60% stake in RBS amid fears about its solvency.

Current times are indeed challenging but RBS has many strong, valuable and enduring business franchises
Sir Philip Hampton

RBS was hit by exposure to the sub-prime market in the US and was also widely thought to have overpaid for the Dutch bank ABN Amro.

An RBS-led consortium paid 71bn euros ($91bn; 61bn) for ABN Amro in October 2007.

In November shareholders voted by 99% in favour of accepting the 20bn ($29.9bn) government bail-out.

At the meeting, the bank's chairman, Sir Tom McKillop, said he was "profoundly sorry" for the bank's financial difficulties.

Chief executive Sir Fred Goodwin also announced his resignation at the meeting, and was replaced by Stephen Hester.

Meanwhile, UK banking shares tumbled on Friday as fears that more financial institutions would look for government cash caused fresh turbulence in the sector.

Barclays shares closed down 25%, while Royal Bank of Scotland saw declines of more than 13%.

Commenting on his appointment, Sir Philip Hampton said: "Current times are indeed challenging but RBS has many strong, valuable and enduring business franchises in the UK and internationally."

"I am optimistic that we can restructure the group to allow these strengths to once again be what we are known and valued for."

Currently, Sir Philip is chairman of UK Financial Investments, the company established to manage the government's shareholding in banks subscribing to its recapitalisation fund. He has said he will leave this post immediately.

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