Bank rescue package backed by £500bn
by Gill Montia
Story link: Bank rescue package backed by £500bn
The full extent of the Government’s efforts to stem the collapse of UK High Street banks is emerging.
The full package involves a £500 billion commitment.
Banks can call on £50 billion of taxpayers’ money to bolster their balance sheets in return for the Government taking a stake in their businesses.
The Government will guarantee £250 billion of UK bank debt in a move aimed at restoring confidence in securities trading and encouraging bank to lend to one another.
In addition, the Bank of England will provide £200 billion for banks to borrow under its existing Special Liquidity Scheme.
Prime Minister Gordon Brown and Chancellor of the Exchequer Alistair Darling are presenting the bail out as having investment opportunities for the taxpayer (who could benefit from future profit from partly nationalised banks).
It is also the lesser of two evils because taking no action would, in any event, leave UK taxpayers facing a colossal bill.
According to the Government statement on the plan, Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered have indicated that they will partake in the £50 billion recapitalisation process.
All have pledged that they will increase their Tier 1 capital ratio. The combined increase will be £25 billion.
Terms and conditions will apparently apply across all aspects of the rescue.
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