UK bank rescue plan: A brief outline

Source: Exec Digital UK

Date :08/10/2008 10:27:40

The UK government has today, October 8, announced details of a £50 billion rescue package for the banking system.

The extra capital will initially be made available to eight of the UK’s largest banks and building societies - Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered - in return for preference shares in them.

It is designed to put the British banking system on a sounder footing.

The key points of the plan are:

• The Government will help banks raise up to £50 billion through the raising of shares in order to improve the long-term health of the system.

• The Bank of England will make £200 billion available through its Special Liquidity Scheme to improve money flows.

• Up to £250 billion in loan guarantees will be available at commercial rates to encourage banks to lend to each other.

• To participate in the scheme banks will have to sign up to an FSA agreement on executive pay and dividends.