The government has announced a second bail out of the banking system as they look to free up the availability of credit . The bail out comprises a huge number of proposals, including a scheme to offers insurance against banks losing more money from toxic debt . The government claim the banks will have to pay for the insurance, but will not pay in shares . The scheme is expected to see banks agree to lose from certain types of debt, prior to obtaining insurance from the Treasury against 90 per cent of the institutions’ further losses from the debt.
There have also been changes to the terms of the last bank rescue, with Northern Rock to be given extra time to repay its government loans, whilst the Royal Bank of Scotland has agreed with the Treasury to swap the £5 billion of preference shares the government holds for new ordinary shares. As a result, the government’s stake in RBS will rise from 58 per cent to nearly 70 per cent.
Chancellor Alistair Darling said there would be ‘very specific legally binding agreements to lend more money’. The government hope that the insurance scheme will encourage banks to loan more money to both individuals and businesses.
Government Announce Second Bank Bail-Out
Financial Services > e-banking > Banking news
Government Announce Second Bank Bail-Out
Mon, 19 Jan 2009
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