This article is from the source 'bbc' and was first published or seen on . It will not be checked again for changes.

You can find the current article at its original source at http://news.bbc.co.uk/go/rss/-/1/hi/business/7836782.stm

The article has changed 24 times. There is an RSS feed of changes available.

Version 4 Version 5
New set of measures to help banks New set of measures to help banks
(30 minutes later)
The government has announced a second package of measures to support the banking system.The government has announced a second package of measures to support the banking system.
The long list of measures includes a scheme to offer insurance against banks losing more money from the toxic debt that started the credit crunch.The long list of measures includes a scheme to offer insurance against banks losing more money from the toxic debt that started the credit crunch.
The banks will have to pay for the insurance, but the government says it does not expect to be paid in shares.The banks will have to pay for the insurance, but the government says it does not expect to be paid in shares.
The government has also agreed to change the terms of its rescues of Northern Rock and RBS Group.The government has also agreed to change the terms of its rescues of Northern Rock and RBS Group.
Risky assetsRisky assets
Under the insurance scheme, banks will agree with the government the amount they expect to lose from particular debt.Under the insurance scheme, banks will agree with the government the amount they expect to lose from particular debt.
The Treasury will then sell insurance against about 90% of the institutions' additional losses from the debt.The Treasury will then sell insurance against about 90% of the institutions' additional losses from the debt.
What we've said is 'you've got to lend about £6bn more to businesses and to people' and the RBS Group have agreed to that Chancellor Alistair DarlingWhat we've said is 'you've got to lend about £6bn more to businesses and to people' and the RBS Group have agreed to that Chancellor Alistair Darling
The government describes the assets involved as being those "most affected by the current economic conditions".The government describes the assets involved as being those "most affected by the current economic conditions".
Most of the debt involved is very difficult to value because the market in it has collapsed.Most of the debt involved is very difficult to value because the market in it has collapsed.
The questionable value of the assets has meant that banks do not know how much money they are in a position to lend.The questionable value of the assets has meant that banks do not know how much money they are in a position to lend.
The government hopes that by insuring them against additional losses, it will encourage the banks to resume normal lending to businesses and individuals.The government hopes that by insuring them against additional losses, it will encourage the banks to resume normal lending to businesses and individuals.
Chancellor Alistair Darling told the BBC that banks taking out the insurance would have to make "very specific legally binding agreements to lend more money".Chancellor Alistair Darling told the BBC that banks taking out the insurance would have to make "very specific legally binding agreements to lend more money".
Previous rescuesPrevious rescues
There have also been changes to the terms of previous bank rescues.There have also been changes to the terms of previous bank rescues.
Northern Rock has said that it is to be given longer to repay its loans from the government.Northern Rock has said that it is to be given longer to repay its loans from the government.
There was concern that the timetable for repaying the loans was forcing Northern Rock to reduce the amount it was lending in mortgages too quickly, which was not in line with the expansion of lending the government wanted.There was concern that the timetable for repaying the loans was forcing Northern Rock to reduce the amount it was lending in mortgages too quickly, which was not in line with the expansion of lending the government wanted.
In another announcement, RBS said it had agreed with the Treasury to swap the £5bn of preference shares the government holds for new ordinary shares.In another announcement, RBS said it had agreed with the Treasury to swap the £5bn of preference shares the government holds for new ordinary shares.
This will mean the government's stake in the bank will increase from 58% to nearly 70%, but it will reduce the amount that the bank has to pay to the government every year.This will mean the government's stake in the bank will increase from 58% to nearly 70%, but it will reduce the amount that the bank has to pay to the government every year.
The chancellor said that as a result RBS would have to lend more money.The chancellor said that as a result RBS would have to lend more money.
"What we've said in return is 'you've got to lend about £6bn more to businesses and to people' and the RBS Group have agreed to that," Mr Darling said."What we've said in return is 'you've got to lend about £6bn more to businesses and to people' and the RBS Group have agreed to that," Mr Darling said.
The agreement came as RBS said it expected to announce 2008 losses of between £7bn and £8bn.The agreement came as RBS said it expected to announce 2008 losses of between £7bn and £8bn.
However, RBS also said it may have to write down the value of past acquisitions, including the share of Dutch bank ABN Amro it bought in 2007, which could lead to a hit of up to £20bn.However, RBS also said it may have to write down the value of past acquisitions, including the share of Dutch bank ABN Amro it bought in 2007, which could lead to a hit of up to £20bn.
Boost to economy
In addition, the set of measures will allow the Bank of England's Monetary Policy Committee (MPC), which sets interest rates, to buy assets to help it meet the inflation target.
Previously, the MPC's only tool was setting interest rates, but there is concern that as rates get closer to zero, they will become less effective and other measures will be needed.
The Bank of England will have £50bn to spend on buying assets to increase the amount of cash that banks have.
The assets it buys will not be the toxic ones insured by the Treasury scheme, but will include debt that is currently difficult to trade on the markets.