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19/01/2009
Second Bank Bail Out Measures Announced
The Government has revealed a second package of measures to encourage banks to start lending again, and to help the sector through the financial crisis.
Among the measures announced today was a scheme that would allow banks to exchange their cash or shares for a Government guarantee on their "toxic" debts.
Under the insurance scheme, banks will agree with the government the amount they expect to lose from particular debt. The Treasury will then sell insurance against about 90% of the institutions' additional losses from the debt.
Gordon Brown said the move was essential in order to free up money in the banking system, following a "major loss" of lending capacity in all economies.
The Prime Minister said: "These are comprehensive measures focused on one purpose - increasing the amount of lending that is available to families and to the businesses who are the backbone of our country and who want to invest and create jobs."
Ministers say the new package, which comes only three months after another £500 billion bailout, is vital to restore bank lending and help companies get credit and stay in business
Mr Brown said previous measures had been set up to stabilise the bank rather than expand lending.
Reacting to suggestions he was handing a "blank cheque" to banks, he said: "You are completely misunderstanding this to suggest this is a blank cheque. Quite the opposite. It is for the Treasury to decide, after an analysis, what the insurance will be."
The PM said there would also be an extension of the credit guarantee scheme and a new strategy for Northern Rock in an effort to increase capacity in the mortgage markets.
Mr Brown added: "The impact of today's announcements on public finances will be temporary, investments will be held for no longer than is necessary to ensure stability.
"We will protect taxpayers' interests, liabilities will be backed by assets and fees will be charged for the schemes that we are introducing.
"But the costs of doing nothing are simply to great. These are extraordinary times, they require unprecedented action."
Meanwhile, Royal Bank of Scotland (RBS) has said it had agreed with the Treasury to swap the £5bn of the Government's preference shares for ordinary shares, meaning the government's stake in the bank will increase from 58% to nearly 78%. The agreement came as RBS announced it expected to announce 2008 losses of between £7bn and £8bn.
The bank's shares fell 63% after the bank said it was heading for a record loss, however, Barclays was up 19%, regaining ground lost in a late sell-off on Friday.
Lloyds Group was up 1.6% and HSBC, which has not taken any government money so far, was little changed.
(JM/BMcC)
Among the measures announced today was a scheme that would allow banks to exchange their cash or shares for a Government guarantee on their "toxic" debts.
Under the insurance scheme, banks will agree with the government the amount they expect to lose from particular debt. The Treasury will then sell insurance against about 90% of the institutions' additional losses from the debt.
Gordon Brown said the move was essential in order to free up money in the banking system, following a "major loss" of lending capacity in all economies.
The Prime Minister said: "These are comprehensive measures focused on one purpose - increasing the amount of lending that is available to families and to the businesses who are the backbone of our country and who want to invest and create jobs."
Ministers say the new package, which comes only three months after another £500 billion bailout, is vital to restore bank lending and help companies get credit and stay in business
Mr Brown said previous measures had been set up to stabilise the bank rather than expand lending.
Reacting to suggestions he was handing a "blank cheque" to banks, he said: "You are completely misunderstanding this to suggest this is a blank cheque. Quite the opposite. It is for the Treasury to decide, after an analysis, what the insurance will be."
The PM said there would also be an extension of the credit guarantee scheme and a new strategy for Northern Rock in an effort to increase capacity in the mortgage markets.
Mr Brown added: "The impact of today's announcements on public finances will be temporary, investments will be held for no longer than is necessary to ensure stability.
"We will protect taxpayers' interests, liabilities will be backed by assets and fees will be charged for the schemes that we are introducing.
"But the costs of doing nothing are simply to great. These are extraordinary times, they require unprecedented action."
Meanwhile, Royal Bank of Scotland (RBS) has said it had agreed with the Treasury to swap the £5bn of the Government's preference shares for ordinary shares, meaning the government's stake in the bank will increase from 58% to nearly 78%. The agreement came as RBS announced it expected to announce 2008 losses of between £7bn and £8bn.
The bank's shares fell 63% after the bank said it was heading for a record loss, however, Barclays was up 19%, regaining ground lost in a late sell-off on Friday.
Lloyds Group was up 1.6% and HSBC, which has not taken any government money so far, was little changed.
(JM/BMcC)
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Northern Ireland WeatherToday:After a dry start this morning rain will spread from the northwest across all parts. This afternoon will be dull with some patchy rain and drizzle. Becoming much milder through the afternoon. Maximum temperature 11 °C.Tonight:A cloudy evening and night with a little light rain or drizzle, perhaps some clear periods developing along the east coast. A very mild night everywhere. Minimum temperature 10 °C.
