Government unveils rescue plan for banks

The Government is planning to inject up to 50bn into the country’s leading banks as part of a new package to shore up the financial system. The recapitalisation scheme will aim to protect ordinary savers, depositors, businesses and borrowers.

The Government is planning to inject up to £50bn into the country’s leading banks as part of a new package to shore up the financial system. The recapitalisation scheme will aim to protect ordinary savers, depositors, businesses and borrowers.

Government proposals announced today (October 8) will provide UK banks with sufficient liquidity in the short term and make available new capital to strengthen the UK banks and building societies’ resources permitting them to restructure their finances, while maintaining their support for the economy.

Following discussions convened by HM Treasury, the Chancellor Alistair Darling announced that Abbey, Barclays, HBOS, HSBC Bank, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered have all signed up in support of the proposals.

“These institutions have committed to the Government that they will increase their total Tier 1 capital by £25bn. They have committed to the Government that this will be concluded by the end of the year,” he says.

He adds: “Other banks and building societies are also able to apply for inclusion in the plan.”

As part of the package, a further £200bn will be made available by the Bank of England for short-term borrowing to provide liquidity to banks and building societies.

There will also be a special company set up to provide up to £250bn in loan guarantees to banks and building societies.

The Chancellor says extra government help will also be offered to UK savers with accounts in the closed Icelandic internet bank Icesave.

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