£50bn rescue plan for UK banks at taxpayer’s expense
by Kay Murchie
Details of a £50 billion rescue package have been unveiled by the UK Government, which will see Britain’s top High Street banks part-nationalised in an attempt to prevent further crises in the financial sector.
Eight of the UK’s largest banks and building societies that have confirmed will take part in the plan are Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, RBS and Standard Chartered.
According to the Government, other banks are eligible to apply for inclusion in the scheme.
In return for the funding, the Government will receive preference shares in the banks but according to Jeremy Batstone-Carr, an analyst at Charles Stanley, the taxpayer will foot the bill due to the rise in Government borrowing.
The Government has been in emergency talks after Prime Minister Gordon Brown and Chancellor Alistair Darling held discussions with the Bank of England’s Governor Mervyn King at Downing Street yesterday.
A press conference will be held at 9.00am this morning where Gordon Brown will unveil further details about the scheme.
The news follows an eventful couple of days in the banking sector which has sent shares in London crashing.
Yesterday saw RBS (RBS) shares plummet by 39% while HBOS lost 40%. RBS had its credit rating cut on Monday by Standard & Poor’s for the first time in a decade. The bank was downgraded to A+ from AA-.
Commenting on the rating, Nigel Greenwood an analyst at Standard & Poor’s, said the downgrade reflects Standard & Poor’s expectation that RBS’ financial profile may continue to weaken.
Meanwhile, there are reports this morning that Sir Fred Goodwin, chief executive of RBS, and Sir Tom McKillop, chairman, are stepping down.
It is expected that the FTSE will fall again today, Asian markets have already crashed overnight after Japan’s Nikkei fell by 9%.
Furthermore, Icesave, an arm of Landsbanki, the Icelandic bank, was seized by the Government yesterday and it was later warned that the bank’s 300,000 UK customers may struggle to claim their money.
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