The Federal Reserve Board is effectively allowing the government of the United Kingdom to become a bank holding company, according to a document released by the central bank on Friday.

In a letter dated Nov. 26, the Fed approved a request by UK Financial Investments Ltd. to become a bank holding company. UKFI is owned by the U.K. government and is charged with managing its shareholdings in banks that have been recapitalized with public money.

The approval is connected to UKFI's efforts to receive an indirect controlling interest in the U.S. subsidiaries of Royal Bank of Scotland Group PLC. The U.K. government could ultimately acquire as much as 58.1% of RBS' ordinary shares.

The Fed used its emergency powers under section 13-3 of the Federal Reserve Act to speedily approve UKFI's request.

"In light of the unusual and exigent circumstances affecting the financial markets in the United Kingdom, and all other facts and circumstances, the [Fed] has determined that emergency conditions exist that justify expeditious action on this proposal," the central bank said in its letter.

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