UK Announces Banking Rescue Plan
The UK government has announced a package of measures aimed at rescuing the banking system that could add up to £500 billion ($880 billion).
It will initially make extra capital available to eight of the UK's largest banks and building societies in return for preference shares in them.
It is "designed to put the British banking system on a sounder footing", said Prime Minister Gordon Brown.
The key points of the plan are:
* Banks will have to increase their capital by at least £25 billion and can borrow from the government to do so.
* An additional £25 billion in extra capital will be available in exchange for preference shares.
* £200bn will be available in short-term loans from the Bank of England, up from £100 billion.
* Up to £250 billion in loan guarantees will be available at commercial rates to encourage banks to lend to each other.
* To participate in the scheme banks will have to sign up to an FSA agreement on executive pay and dividends.
Published on October 8, 2008
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