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February 25, 2009

Treasury hammers out guarantees with RBS and Lloyds

by Gill Montia

Story link: Treasury hammers out guarantees with RBS and Lloyds

More details are emerging of proposed taxpayer support for Royal Bank of Scotland (RBS) and Lloyds Banking Group.

Yesterday, the BBC reported that the Treasury was working on a scheme that would guarantee £500 billion worth of bad debt and investments held by the banks under an Asset Protection Scheme.

Negotiations over the proportion of losses that could be covered and the fees payable by the banks for taking part in the scheme are still taking place and according to the BBC, RBS must reach an agreement by tomorrow (Thursday) while Lloyds has until Friday to sign up.

The measures are intended to free up lending and strengthen the banks, which have both been subject to speculation that they could become fully nationalised.

According to reports in the press, the deal could also see RBS and Lloyds legally obliged to provide up to £40 billion in new lending.

Homeowners and small businesses would be the beneficiaries and the new cash in circulation would be in addition to the £14 billion in mortgage lending pledged earlier this week by Northern Rock.

 

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