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ITN
Darling announces banks rescue plan
Darling announces banks rescue plan
The Government has confirmed it is pumping new capital into Britain's banks and building societies as part of a rescue package. The £50 billion scheme will see taxpayers' money used to buy stakes in major banks in an attempt to halt the meltdown in the financial sector. Prime Minister Gordon Brown said the deal should restore "confidence and trust" to the beleaguered banking system. "Extraordinary times call for the bold and far-reaching solutions that the Treasury has announced," he said. "Our stability and restructuring programme is comprehensive, it is specific and it breaks new ground. "This is not a time for conventional thinking or outdated dogma but for the fresh and innovative intervention that gets to the heart of the problem." Chancellor Alistair Darling said that the measures were in response to "extraordinary times". "Those are absolutely critical so far as the system is concerned and we want to make sure that we can get the system going again," he said. "It is a process that inevitably will take time. It is not an instant change but it is a restructuring, it is stabilising the system, and that is very important." Eight UK banks and building societies - including RBS, Barclays, HBOS, Lloyds TSB and Nationwide - have signed up to an initial £25 billion scheme. And the Government said it stood ready to make at least another £25 billion available for other eligible institutions. The Bank of England is also extending the existing £50 billion Special Liquidity Scheme to £200 billion, while a further £250 billion being pumped in under a debt guarantee scheme. It is hoped that the extraordinary measures will provide the capital boost needed and help restore confidence to get banks lending to each other again. But the Government is demanding that in return for the public-backed cash injection, banks must cap executive pay and shareholder dividends and commit to supporting lending to homebuyers and small businesses. The Chancellor insisted the taxpayer would not lose out. "The taxpayers' interest is being protected," he said. "I'm very clear that in return for all this, the taxpayer has got to see some upside. In relation to lending to small businesses, in relation to mortgages - that's important too." Mr Darling said he still did not "rule anything out" but, of the rescue package, he said: "I believe it will go a long way." He admitted he had been "irritated" by speculation about the package since Sunday because the Government was working on the package. "I wanted to announce it when the time was right, when we had got everything sorted out, we had a scheme that worked and the big banks were signed up to it," he said. "And we actually finished these discussions only a few hours ago." Mr Darling said it was "absolutely not" true that the chairman and chief executive of Royal Bank of Scotland would lose their jobs as part of a deal with the Government. "It's not the Government's business to deal with banks' appointments," he said. "It is entirely a matter for banks." HBOS, which is in the process of being taken over by Lloyds TSB, said it welcomed the announcement. "The Government's announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system," said a spokesman. "HBOS believes that this initiative is very much in the interests of its shareholders and customers." The bail-out comes after another day of panic on the stock market, with banks suffering devastating share losses amid concerns over their funding. Royal Bank of Scotland shares plummeted by almost 40 per cent.
ITN | October 8, 2008
