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Salmond makes interest rate call Salmond makes interest rate call
(about 2 hours later)
First Minister Alex Salmond has called for a substantial cut in interest rates to head off a possible recession.First Minister Alex Salmond has called for a substantial cut in interest rates to head off a possible recession.
Mr Salmond said the UK Government must also act to guarantee bank deposits.Mr Salmond said the UK Government must also act to guarantee bank deposits.
He also wants Westminster to extend liquidity through the Bank of England to commercial banks, in order to deal with the current crisis.He also wants Westminster to extend liquidity through the Bank of England to commercial banks, in order to deal with the current crisis.
UK banking shares, including those of Scottish banks, have plunged over fears that more financial institutions may need government assistance.UK banking shares, including those of Scottish banks, have plunged over fears that more financial institutions may need government assistance.
HBOS shares dropped 42%, Royal Bank of Scotland (RBS) fell 39%, Barclays shed 9% and Lloyds TSB was down 13%. The right way to deal with this and stand up to the problem is to have a comprehensive approach to the whole financial sector Alex SalmondFirst MinisterHBOS shares dropped 42%, Royal Bank of Scotland (RBS) fell 39%, Barclays shed 9% and Lloyds TSB was down 13%. The right way to deal with this and stand up to the problem is to have a comprehensive approach to the whole financial sector Alex SalmondFirst Minister
The heads of Britain's biggest banks met Chancellor Alistair Darling on Monday night to discuss a Treasury plan to raise funds.The heads of Britain's biggest banks met Chancellor Alistair Darling on Monday night to discuss a Treasury plan to raise funds.
The banks have denied asking for any money.The banks have denied asking for any money.
RBS confirmed that the meeting with Mr Darling had taken place, but blamed the share price fall on two very large share trades taking place, which under stock market rules meant the shares were temporarily suspended.RBS confirmed that the meeting with Mr Darling had taken place, but blamed the share price fall on two very large share trades taking place, which under stock market rules meant the shares were temporarily suspended.
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 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.
'Key danger''Key danger'
Mr Salmond said: "We're in a febrile atmosphere where any institution can come under share price pressure, therefore the right way to deal with this and stand up to the problem is to have a comprehensive approach to the whole financial sector rather than take it on a case by case basis. Mr Salmond told BBC Scotland: "We're in a febrile atmosphere where any institution can come under share price pressure, therefore the right way to deal with this and stand up to the problem is to have a comprehensive approach to the whole financial sector rather than take it on a case by case basis.
"Three things should be done: guarantee all deposits, make sure the financial sector has medium-term liquidity, provided by the Bank of England to encourage lending, "and an interest rate cut to send a signal that it's appreciated that this financial sector problem is now well into the real economy.""Three things should be done: guarantee all deposits, make sure the financial sector has medium-term liquidity, provided by the Bank of England to encourage lending, "and an interest rate cut to send a signal that it's appreciated that this financial sector problem is now well into the real economy."
He said it should become obvious that "the key danger is not inflationary pressures, the key danger is the wider economy going into a deep recession".He said it should become obvious that "the key danger is not inflationary pressures, the key danger is the wider economy going into a deep recession".
"That means you have to have an interest rate cut that's decisive," he said."That means you have to have an interest rate cut that's decisive," he said.
Mr Salmond refused to be drawn on what the figure should be, and would only say the cut should be "serious."Mr Salmond refused to be drawn on what the figure should be, and would only say the cut should be "serious."
He added that actions should be "sooner, rather than later."He added that actions should be "sooner, rather than later."