UK banks get second bailout
(20 January 2009 – UK) The British Treasury has announced its second package of measures to rescue the UK banking sector.
The latest set of measures is designed to increase funding in the market and to encourage banks to lend to individuals and businesses, as credit remains scarce or expensive to obtain.
British Prime Minister, Gordon Brown, said that without the new schemes, jobs may have been needlessly lost at healthy firms struggling to gain access to necessary funding and therefore good businesses must have access to credit.
It is because of this that the British Government is taking action to expand lending.
There were four key points to the new package announced by the Treasury.
Firstly, banks will be able to take up government insurance against their expected bad debts. This is intended to cap potential losses and therefore boost confidence.
Secondly, the Bank of England will be able to buy up to £50bn worth of high quality assets from companies in all sectors of the economy.
These assets include paper issued under the Credit Guarantee Scheme, corporate bonds, commercial paper, syndicated loans and a limited range of asset backed securities.
Also, Northern Rock, which the British government previously nationalised, has been given extra time to repay its loans from the government. The bank’s loan book will not be wound down. This is intended to increase mortgage lending capacity in the market.
Finally, the government is increasing its stake in RBS to nearly 70 percent from 58 percent. This follows reports that RBS is set to report a £28 billion loss, including asset write-downs of up to £20bn.
British Prime Minister, Gordon Brown, said that without the new schemes, jobs may have been needlessly lost at healthy firms struggling to gain access to necessary funding and therefore good businesses must have access to credit.
It is because of this that the British Government is taking action to expand lending.
There were four key points to the new package announced by the Treasury.
Firstly, banks will be able to take up government insurance against their expected bad debts. This is intended to cap potential losses and therefore boost confidence.
Secondly, the Bank of England will be able to buy up to £50bn worth of high quality assets from companies in all sectors of the economy.
These assets include paper issued under the Credit Guarantee Scheme, corporate bonds, commercial paper, syndicated loans and a limited range of asset backed securities.
Also, Northern Rock, which the British government previously nationalised, has been given extra time to repay its loans from the government. The bank’s loan book will not be wound down. This is intended to increase mortgage lending capacity in the market.
Finally, the government is increasing its stake in RBS to nearly 70 percent from 58 percent. This follows reports that RBS is set to report a £28 billion loss, including asset write-downs of up to £20bn.
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