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Real Estate News Releases
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(EMAILWIRE.COM, January 27, 2009 ) UK - Just over three months after the first lifeline, the British Government has masterminded a second bailout of the UK banking sector in a further attempt to kickstart the ailing economyÂ…
Designed to boost the mortgage market and encourage lending to homeowners and commercial ventures, the newly announced bailout will see the Government insuring banks against potential losses on risky loans in return for payment in cash or shares.
In short, the new plan increases state control over lenders. European stock markets rallied following the announcement this morning, after talks over the weekend between Chancellor Alistair Darling, Prime Minister Gordon Brown, the Bank of England and the Financial Services Authority.
The new plan would require banks to identify their riskiest assets and allow them to pay a fee to insure them with the Government in return for lending more money.
In addition, the Government has given the Bank of England the green light to, in effect, start printing money by buying whatever bank assets it considers to be necessary.
The UK Government also said that it was revising the terms of its bailout of Royal Bank of Scotland (RBOS) - converting around £5 billion of preference shares issued by RBOS into ordinary shares, increasing its shareholding in the bank from 58 to 70 per cent.
Lloyds Banking Group, which includes HBOS, is expected to decline a similar offer to convert £5.5 billion of preference shares.
Banks that do take up the voluntary section of the scheme will also have to make firm commitments to increase lending to consumers and businesses.
Gordon Brown said, “We place the blame for the financial crisis on irresponsible lending by the banks.
“Those that do choose to take advantage of the new measures will have to sign a legally binding agreement with the Government to provide more credit,” he added.
Previously, banks refused to increase lending despite pressure from industry and consumers following the last bailout in October and further stimulus in November.
This latest bailout stands to cost taxpayers another £100 billion and, by offering to insure bank loans, the Government is exposing taxpayers to billions of pounds of potential losses.
But, participating institutions will take the initial losses, with the Treasury bearing most of the rest.
The new measures have become increasingly urgent as British home prices slide and measures of economic activity grow increasingly dire.
With a 2010 deadline for a general election, the extent to which Gordon BrownÂ’s latest bank plan was perceived as successful could have a significant effect on his political future.
The latest move by the British Government comes as America bails out Citigroup and Bank of America for the second time and brings one of its trump cards - the Troubled Asset Relief Program into play.
For more information on international money and the market in general, please visit http://www.themovechannel.com/money/
-ENDS-
Notes to editors:
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For further information as well as images and interview possibilities, please contact:
Dan Johnson
Managing Director
http://www.themovechannel.com/money/
0207 952 7650
TheMoveChannel.com
Jon Moore
020 7952 7658
j.moore@themovechannel.com 
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