Britain launches 50 billion pounds rescue plan for banks

H.S. Rao
London, Oct 8 (PTI) The British government Wednesday announced a 50 billion pounds (USD 79 billion) emergency rescue plan to partly nationalise major banks, a day after the stock prices plunged raising investors fear about their survivability in the global financial meltdown.

Assuring that the move would help stabilise eight
major British banks, the Prime Minister Gordon Brown billed it
as a "radical" plan to restore public "confidence and trust"
in the financial system.

Under the move unveiled half an hour before the
markets opened Wednesday, the treasury said it would be
investing upto 50 billion pounds in exchange for preference
shares in eight of the country's largest banks and building
societies: Abbey National PLC, Barclay's PLC, HSBC, HBOS,
Lloyds TSB Bank, Royal Bank of Scotland, Nationwide building
society and Standard and Chartered Bank.

Prime Minister Gordon Brown told newsmen at 10,
Downing Street: "Extraordinary times call for the bold and
far-reaching solutions."

"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is not a time for conventional thinking or outdated dogma but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," he said.

Chancellor of Exchequer Alistair Darling said the
scheme would see taxpayers' money used to buy stakes in major
banks in an attempt to halt the meltdown in the financial
sector.

And the Government said it stood ready to make at
least another 25 billion pounds available for other eligible
institutions.

The rescue plan came a day after the British banks
stock prices plunged on investor fears that they will not be
able to get through the global financial meltdown without
help.

The Bank of England also announced that it will also
make available 200 billion pounds (USD 317 billion) in short
term loans and issue 250 billion pounds (USD 396 billion) to
guarantee loans between banks.

In return for the public-backed cash injection, the
Government is demanding that the banks must cap executive pay
and shareholder dividends and commit to supporting lending to
home-buyers and small businesses.

The Chancellor made it clear that the government was
absolutely not seeking to take control of the banks.

"We are not going to run the banks. They will run as
commercial operations, albeit with the government help in its
restructuring," he said in a joint news conference with Brown.

Following the government intervention the market
welcomed the treasury move and bank share prices began
stabilising and recovering in early trading.

Emphasising that the taxpayer interests would be
protected, an official 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 Prime Minister said the recovery plan would be
funded through increased borrowing but insisted taxpayers
would "earn a proper return".

The rescue plan marks a sharp turn in the fortunes of
the British banks, which till now seemed immune to global
financial crisis being faced by America's beleaguered
financial institutions.

Just three weeks ago Barclays snapped up North
American operations of Lehmann Brothers, the collapsed Wall
Street giant. PTI HSR