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Darling pledges to support banks Stocks slide despite reassurances
(about 1 hour later)
Chancellor Alistair Darling says the government will do whatever is necessary to ensure the stability of the financial system. The UK's top share index chalked up its biggest one-day points fall ever as Chancellor Alistair Darling attempted to reassure financial markets.
He said that would include action to support the banking system as a whole as well as supporting individual banks. Mr Darling said the government would do whatever necessary to ensure the stability of the financial system but offered no new specific measures.
His statement came as stock markets worldwide plunged on concerns about the health of the banking sector. The FTSE 100, which was launched in 1984, fell 391.1 points, or 7.85%, to close at 4,589.2.
The FTSE 100 index of leading shares suffered its biggest one-day fall on record, down 7.85%. This means that £93.4bn has been wiped off the value of the index's shares.
The chancellor told MPs that European countries needed to work together to respond to the global financial crisis. In terms of points, Monday's fall was bigger than the slides seen in the wake of the September 11 attacks on the US and the 1987 stock market crash.
'Support'
Mr Darling told MPs that the government would act to support the banking system as a whole as well as supporting individual banks
The chancellor said that European countries needed to work together to respond to the global financial crisis.
But despite pledges being given by some European Union countries, Mr Darling stopped short of guaranteeing all bank savings and called on EU members to co-ordinate action.But despite pledges being given by some European Union countries, Mr Darling stopped short of guaranteeing all bank savings and called on EU members to co-ordinate action.
"When member states take unilateral action, it does have a knock-on effect," he said."When member states take unilateral action, it does have a knock-on effect," he said.
He also said that the Bank of England would inject a further £40bn into the financial system to help ease the credit crunch.
Stocks slideStocks slide
Stock markets around the world also fell sharply during trading on Monday. There can be no sustained recovery until the markets are in the clutches of utter despair Robert Peston, BBC business editor Read Robert's blogStock markets around the world also fell sharply during trading on Monday. There can be no sustained recovery until the markets are in the clutches of utter despair Robert Peston, BBC business editor Read Robert's blog
In New York the Dow Jones industrial average fell 4.65% to 9,846 points - sinking below the key 10,000 point level for the first time in four years.In New York the Dow Jones industrial average fell 4.65% to 9,846 points - sinking below the key 10,000 point level for the first time in four years.
The falls follow a series of events including:
  • The German government was forced to salvage a 50bn euro ($69bn; £39bn) rescue package for mortgage provider Hypo Real Estate
  • Denmark, Sweden and Iceland increased the amount of protection depositors in their banks receive.
  • EU leaders issued a joint statement saying they would take the necessary measures to protect both the system and individual depositors.
  • Iceland said its banks had agreed to sell some of their overseas assets and the government was also trying to persuade trade union pension funds to repatriate some of their funds.
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  • Central banks across Europe - including the European Central Bank and Bank of England - offered more than $74bn to banks in short-term loans in separate efforts aimed at trying to making cash available for the banking sector
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  • Shares in Fortis were suspended, a day after France's BNP Paribas said it would take a 75% stake in the Benelux bank.
 The falls follow a series of events including:
  • The German government was forced to salvage a 50bn euro ($69bn; £39bn) rescue package for mortgage provider Hypo Real Estate
  • Denmark, Sweden and Iceland increased the amount of protection depositors in their banks receive.
  • EU leaders issued a joint statement saying they would take the necessary measures to protect both the system and individual depositors.
  • Iceland said its banks had agreed to sell some of their overseas assets and the government was also trying to persuade trade union pension funds to repatriate some of their funds.
    class="bulletList">
  • Central banks across Europe - including the European Central Bank and Bank of England - offered more than $74bn to banks in short-term loans in separate efforts aimed at trying to making cash available for the banking sector
    class="bulletList">
  • Shares in Fortis were suspended, a day after France's BNP Paribas said it would take a 75% stake in the Benelux bank.
Emergency meetingEmergency meeting
Mr Darling told the Commons that an emergency meeting would be held in Luxembourg on Tuesday, where he hoped that all EU member states would agree to act together to avoid confusion.Mr Darling told the Commons that an emergency meeting would be held in Luxembourg on Tuesday, where he hoped that all EU member states would agree to act together to avoid confusion.
The chancellor said that 98% of UK bank accounts will be covered by deposit protection once the increase in the amount of bank deposits guaranteed by the government takes effect on Tuesday.The chancellor said that 98% of UK bank accounts will be covered by deposit protection once the increase in the amount of bank deposits guaranteed by the government takes effect on Tuesday.
The threshold has increased from £35,000 to £50,000 and Mr Darling said that the Financial Services Authority was looking at whether to increase this further.The threshold has increased from £35,000 to £50,000 and Mr Darling said that the Financial Services Authority was looking at whether to increase this further.
He also said that the Bank of England would inject a further £40bn into the financial system to help ease the credit crunch.