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| Rescue plan for UK banks unveiled | Rescue plan for UK banks unveiled |
| (10 minutes later) | |
| The UK government has announced details of a rescue package for the banking system worth up to £50bn ($88bn). | The UK government has announced details of a rescue package for the banking system worth up to £50bn ($88bn). |
| It will initially make the extra capital available to eight of the UK's largest banks and building societies. | It will initially make the extra capital available to eight of the UK's largest banks and building societies. |
| In return for the funding, the government will receive preferential shares in those institutions. | In return for the funding, the government will receive preferential shares in those institutions. |
| The money will be used to prop up the banking system that has seen share prices plunging in recent weeks as banks have struggled to access funding. | The money will be used to prop up the banking system that has seen share prices plunging in recent weeks as banks have struggled to access funding. |
| Special company | Special company |
| As part of the package, a further £200bn will be made available by the Bank of England for short-term borrowing to provide liquidity to banks and building societies. | As part of the package, a further £200bn will be made available by the Bank of England for short-term borrowing to provide liquidity to banks and building societies. |
| Taking taxpayers' money will not be a licence to trade as normal Robert Peston, BBC business editor Read Robert Peston's blog | Taking taxpayers' money will not be a licence to trade as normal Robert Peston, BBC business editor Read Robert Peston's blog |
| There will also be a special company set up to provide up to £250bn in loan guarantees to banks and building societies. | There will also be a special company set up to provide up to £250bn in loan guarantees to banks and building societies. |
| Much of the current crisis has been caused by the banks' unwillingness to lend to each other, so the government hopes that if those loans can be guaranteed then lending will resume. | Much of the current crisis has been caused by the banks' unwillingness to lend to each other, so the government hopes that if those loans can be guaranteed then lending will resume. |
| "This is beginning a process of un-bunging a big problem where banks won't lend to each other for long periods," Mr Darling said. | "This is beginning a process of un-bunging a big problem where banks won't lend to each other for long periods," Mr Darling said. |
| The lenders that have confirmed they will take part in the scheme are Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered. | The lenders that have confirmed they will take part in the scheme are Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered. |
| The Treasury said that other banks and building societies would be able to apply for inclusion in the plan. | The Treasury said that other banks and building societies would be able to apply for inclusion in the plan. |
| Possible profit | Possible profit |
| Preferential shares pay a fixed rate of interest instead of a dividend, which has to be paid before other shareholders receive anything, but they do not carry voting rights. | Preferential shares pay a fixed rate of interest instead of a dividend, which has to be paid before other shareholders receive anything, but they do not carry voting rights. |
| Taxpayers may even end up making a profit from the shares, but that is by no means guaranteed. | Taxpayers may even end up making a profit from the shares, but that is by no means guaranteed. |
| The FTSE 100 in London opened lower following the announcement, trading down 180 points or 3.9%. | |
| But bank shares have risen, led by HBOS, which has risen 26% following its hefty falls on Tuesday. | But bank shares have risen, led by HBOS, which has risen 26% following its hefty falls on Tuesday. |
| 'Stop the panic' | 'Stop the panic' |
| BBC business editor Robert Peston said there would be strings attached for banks that take the government money. | BBC business editor Robert Peston said there would be strings attached for banks that take the government money. |
| These will include restrictions on executive pay and dividends for other shareholders. | These will include restrictions on executive pay and dividends for other shareholders. |
| "Taking taxpayers' money will not be a licence to trade as normal," he said. | "Taking taxpayers' money will not be a licence to trade as normal," he said. |
| It is hoped that the deal will get the money markets going again and assure the future of the banking system. | It is hoped that the deal will get the money markets going again and assure the future of the banking system. |
| "They've got additional capital now if they want it, they've got an unlimited source of liquidity," said Terry Smith, chief executive of the money brokers, Tullett Prebon. | "They've got additional capital now if they want it, they've got an unlimited source of liquidity," said Terry Smith, chief executive of the money brokers, Tullett Prebon. |
| "That certainly should stop the panic in terms of people wondering whether or not the banks are safe." | "That certainly should stop the panic in terms of people wondering whether or not the banks are safe." |
| The deal has also been welcomed by the banks. | The deal has also been welcomed by the banks. |
| "The government's announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system," HBOS said in a statement. | "The government's announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system," HBOS said in a statement. |