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| Version 1 | Version 2 |
|---|---|
| Government to insure toxic assets | Government to insure toxic assets |
| (about 4 hours later) | |
| The Treasury has launched a taxpayer-backed scheme to insure banks' riskiest assets against further losses. | The Treasury has launched a taxpayer-backed scheme to insure banks' riskiest assets against further losses. |
| The scheme aims to clean up banks' balance sheets and to encourage them to lend more freely. | The scheme aims to clean up banks' balance sheets and to encourage them to lend more freely. |
| Chancellor Alistair Darling said the programme would restore confidence to the banking sector. | Chancellor Alistair Darling said the programme would restore confidence to the banking sector. |
| RBS was the first bank to sign up to the scheme. It will put in £325bn of toxic assets. Lloyds said it would also take part in the programme. | RBS was the first bank to sign up to the scheme. It will put in £325bn of toxic assets. Lloyds said it would also take part in the programme. |
| "We want to rebuild confidence and provide certainty to enable banks to maintain and extend their lending," Mr Darling said. | "We want to rebuild confidence and provide certainty to enable banks to maintain and extend their lending," Mr Darling said. |
| "If we don't fix the banks, we won't fix the economy." | "If we don't fix the banks, we won't fix the economy." |
| ASSET PROTECTION SCHEME Taxpayers underwrite banks' bad debtsEssentially an insurance schemeBanks pay a fee to take partBanks are liable for initial losses, similar to paying the excess on an insurance claim Peston: Big losses, big bailout class="" href="http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/shares/3/87122/intraday.stm">See RBS's share price class="" href="http://newsvote.bbc.co.uk/1/shared/fds/hi/business/market_data/shares/3/498/0/default.stm">See UK bank share prices | |
| Shadow chancellor George Osborne said that other government schemes to get banks lending again had not yet worked and demanded to know the extent of the total taxpayer exposure. | Shadow chancellor George Osborne said that other government schemes to get banks lending again had not yet worked and demanded to know the extent of the total taxpayer exposure. |
| "British taxpayers are insuring the car after it has crashed," he said. | "British taxpayers are insuring the car after it has crashed," he said. |
| Banks that sign up to the Asset Protection Scheme will bear initial losses on the protected assets, with the government shouldering the remaining losses. | |
| In return, banks will also pay a participation fee and enter into legally binding agreements to increase the amount of lending they provide to homeowners and businesses. | In return, banks will also pay a participation fee and enter into legally binding agreements to increase the amount of lending they provide to homeowners and businesses. |
| Taxpayers may become liable for about £500bn-worth of bad loans and investments. | |
| Terms | Terms |
| RBS will pay a participation fee of £6.5bn to the Treasury and has promised to lend £25bn in 2009 - £9bn of mortgage lending and £16bn of business lending. | RBS will pay a participation fee of £6.5bn to the Treasury and has promised to lend £25bn in 2009 - £9bn of mortgage lending and £16bn of business lending. |
| The agreement will mean RBS is liable for the first £19.5bn losses. | |
| Lloyds is expected to detail its terms when it releases its 2008 results on Friday. | Lloyds is expected to detail its terms when it releases its 2008 results on Friday. |
| The Treasury said it would also inject £13bn of capital into RBS, on top of £20bn already announced, and make an additional £6bn available, should RBS need yet more capital. | The Treasury said it would also inject £13bn of capital into RBS, on top of £20bn already announced, and make an additional £6bn available, should RBS need yet more capital. |
| This could take the government's stake in RBS to 80%, Mr Darling said. | This could take the government's stake in RBS to 80%, Mr Darling said. |
| "We will have shortly 70% of the voting shares, in other words we have a controlling interest. In terms of the economic interest, what is the taxpayer interest, the figure goes up to just over 80%, so we do have a significant holding in this bank," he said. | "We will have shortly 70% of the voting shares, in other words we have a controlling interest. In terms of the economic interest, what is the taxpayer interest, the figure goes up to just over 80%, so we do have a significant holding in this bank," he said. |
| British retail banks with more than £25bn in eligible assets will have until 31 March to join the Asset Protection Scheme, which will run for a minimum of five years. | British retail banks with more than £25bn in eligible assets will have until 31 March to join the Asset Protection Scheme, which will run for a minimum of five years. |
| Investors welcomed news of the scheme, saying its terms were more favourable than initially thought. | |
| RBS shares were up 17% at 27.1 pence in afternoon trade, while Lloyds Banking Group climbed 24% to 71p. | |
| Barclays rose 6% to 111.6p and HSBC added 5% to trade at 518.25p. |