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Government to unveil bank rescue Government to unveil bank rescue
(30 minutes later)
The UK government is poised to announce details of a comprehensive rescue package for the banking system, the BBC's business editor has learned.The UK government is poised to announce details of a comprehensive rescue package for the banking system, the BBC's business editor has learned.
It will include a proposal to inject capital into banks and to provide a standby facility to ensure UK banks have enough cash.It will include a proposal to inject capital into banks and to provide a standby facility to ensure UK banks have enough cash.
It is the government's attempt to stabilise the country's banking system. This is the government's attempt to stabilise the country's banking system.
It comes after a day of steep falls in UK banking stocks and a high-level Downing Street meeting. The news comes after a day of steep falls in UK banking stocks and a high-level Downing Street meeting.
Prime Minister Gordon Brown has held talks with Bank of England Governor Mervyn King. Chancellor Alistair Darling said he would make a statement before financial markets open on Wednesday morning and address the House of Commons later in the day.
Chancellor Alistair Darling and the chairman of the Financial Services Authority, Lord Turner, also took part in the discussions. Prime Minister Gordon Brown earlier held talks with Bank of England Governor Mervyn King. Mr Darling and the chairman of the Financial Services Authority, Lord Turner, also took part in the discussions.
Downing Street denied it was an "emergency meeting", adding that it would focus on "ongoing action". 'Big moment'
The BBC's business editor Robert Peston said the rescue plan would be unveiled within hours. The BBC's business editor Robert Peston said the Treasury has been working on the plan for weeks.
"In a UK context, this is a very big moment," he said."In a UK context, this is a very big moment," he said.
It will involve investing taxpayers' money in banks, which should make them stronger and more confident to lend, he said.
To address the collapse of confidence in money markets, the standby facility should ensure big banks have enough cash to fund day-to-day operations.
"We need a full and comprehensive plan. We don't need any more step-by-step measures," said Peter Hahn, a banking expert at the Cass Business School.
"Markets should react positively but we need to know what the details are."
Shares hitShares hit
Banking shares dropped after the bosses of biggest UK banks meet with Chancellor Alistair Darling on Monday evening - raising fears that the sector needs government intervention. Banking shares dropped after the bosses of biggest UK banks met Chancellor Alistair Darling on Monday evening - raising fears that the sector needs government intervention.
HBOS dropped 42%, Royal Bank of Scotland (RBS) fell 39%, Barclays shed 9% and Lloyds TSB was down 13%.HBOS dropped 42%, Royal Bank of Scotland (RBS) fell 39%, Barclays shed 9% and Lloyds TSB was down 13%.
Monday's meeting was attended by Mr Darling, Mr King and Lord Turner, as well as representatives of RBS, Barclays and Lloyds TSB.Monday's meeting was attended by Mr Darling, Mr King and Lord Turner, as well as representatives of RBS, Barclays and Lloyds TSB.
The Treasury is understood to have been formulating a plan that would allow the government to provide extra funding to the banks in exchange for stakes in them.
The government said it would not speculate about what policy options were being considered.
Savers' fears
Meanwhile, customers of the Icesave internet bank have been warned they will probably have to claim compensation for money held in their savings accounts.Meanwhile, customers of the Icesave internet bank have been warned they will probably have to claim compensation for money held in their savings accounts.
UK authorities are preparing for the bank's parent in Iceland, Landsbanki, to be declared insolvent. UK authorities are preparing for the bank's parent in Iceland, Landsbanki, to be declared insolvent and the bank is not allowing savers to withdraw their cash.
Icesave has 350,000 savers in the UK and Netherlands, with about £4.5bn of deposits.Icesave has 350,000 savers in the UK and Netherlands, with about £4.5bn of deposits.