New bank bailout to be unveiled

The Government is planning to pour billions of taxpayers money into British banks in a new rescue package to be unveiled today (January 19) by Prime Minister Gordon Brown. It is the second bailout in three months.

The government is expected to underwrite up to £200bn of “toxic assets” – bad debts and risky loans. It will guarantee £100m of mortgage-backed securities and is also launching a bank insurance scheme to cover against future bad loans, which banks would have to pay for.

It has also agreed to change the terms of the rescues deals of Northern Rock, which will be given longer to repay its loans, and Royal Bank of Scotland Group, with the government increasing its stake from 58% to nearly 70%.

The agreement comes as RBS says it is expects to announce 2008 losses of between £7bn and £8bn.

Chancellor Alistair Darling says banks will only have access to extra money if they “enter into binding agreements to make sure that it goes to the people and businesses it is designed to support”.

The measures come after a £37bn bailout in October failed to kickstart lending.

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