F&I Management & Training

This morning the Chancellor of the Exchequer, Alistair Darling, gave details of the rescue package designed to prop up the banking system that has seen share prices plunging in recent weeks. Initially the government will make extra capital available to the UK’s seven largest banks and largest building society in exchange for shares in them. The Bank of England (BoE) will also make an additional £200bn available for short-term borrowing. This will provide liquidity to the struggling banks that have seen their shares prices fall at unprecedented levels over recent days. The government will also set up a special company to provide up to £250bn in loan guarantees to the banks and building society. Speaking to Sky News, Mr. Darling said the measures being taken 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." Despite the announcement the FTSE 100 in London fell 7% in early trading. HBOS shares rose 15% but both Barclays and RBS fell 15% and 11% respectively. The government is hoping the new measures will encourage banks to resume lending to each other, which economist have attributed as one of the main reasons for the current crisis.

DATED: 08.10.08

FEED: IUK