PM to "root out" risk-takers

It will receive preference shares in the banks as part of the deal, but the premier denied he was interested in keeping hold of these shares indefinitely.

At a speech at Canary Wharf's Thomson Reuters building on Monday, he said: "The government will not be a permanent investor. Over time we intend to dispose of all these investments in an orderly way. In the meantime our shares will be held at arms length."

Conditions have also been imposed on those banks that have signed up to the Government's bailout scheme, which comes as world leaders desperately attempt to shore up the floundering financial system.

The boards of the banks involved will not receive bonuses this year, no dividends will be paid out until the Government's preference shares have been fully redeemed, and commitments have been secured to restore and maintain loans for home buyers.

The prime minister stressed the fact that bonuses should be based in future on "rewarding effort and enterprise and not short term irresponsibility".

He said: "In extraordinary times, with financial markets ceasing to work, the government cannot just leave people on their own to be buffeted about.
"For savers, for small businesses and for home owners we must in an uncertain and unstable world be the rock of stability upon which British people can depend."

Speaking at the same event, Chancellor Alistair Darling said: "We are not against bonuses in themselves because bonuses are a very good way of getting people to do good things and to serve employers of their bank well, but it is quite clear that in the current circumstances it would be absolutely nonsense for board members to be taking bonuses."

Read the full press conference here