Banks get £50bn cash bail-out

Published:
08 October 2008
Topic:
News,Money,Savings

A £50 billion crisis bail-out for stricken UK banks has been announced by Chancellor Alistair Darling.

The scheme will see taxpayers' money used to buy stakes in major banks in an attempt to halt the meltdown in the financial sector.

It came after a day of panic on the stock market on Tuesday, with banks suffering devastating losses amid concerns over their funding.

The Bank of England is also extending the existing £50 billion Special Liquidity Scheme to £200 billion, while a further £250 billion is being pumped in under a debt guarantee scheme.

The Government is demanding that in return, banks must cap executive pay and shareholder dividends and commit to supporting lending to homebuyers and small businesses.

A statement said: "If the Government is to provide the capital, the issue will carry terms and conditions that appropriately reflect the financial commitment being made by the taxpayer."

The banks that have confirmed they will take part in the scheme are: Abbey, Barclays, HBOS, HSBC Bank, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland, and Standard Chartered. Shares in most of the major UK banks rose sharply on news of the bail-out.

Adair Turner, chairman of the FSA, said: "The comprehensive package announced today will ensure that our banks and building societies are undoubtedly robust. It should restore confidence to the whole financial system.

"We will continue to work closely with firms, and with our colleagues at the Bank of England and the Treasury, to steer our financial infrastructure through the current global turmoil in good shape to meet the needs of consumers, businesses and society as a whole."

Kevin Mountford, head of banking and mortgages at moneysupermarket.com, said: "I think that UK savers can now relax. The Chancellor has acted this morning, and whilst he has stopped short of offering an actual guarantee to savers he has made it clear that no Icesave customers in the UK will lose any money, even on balances over the FSCS limit. So it really is a case of actions speaking louder than words. I don't see any reason why UK savers should fear for their funds any longer. However, it is absolutely vital that the FSCS now pays compensation to savers within days rather than weeks or months."

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