General Federation of Trade Unions
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£50 bn BANK BAIL OUT
Posted on Tuesday, April 22, 2008
Chancellor Alistair Darling has backed the Bank of England’s £50bn plan to help prevent the credit crisis causing more damage to the UK banking system.
Under the scheme, banks will be able to swap potentially risky mortgage debts for secure government bonds to help them operate during the credit squeeze.
The central bank anticipates that initial take-up of the scheme will total £50bn but there is no cap on lending.
Darling denied the support was a bailout, stressing that the risk of losses remained with the banks which will be required to pay a fee for the swap facility and provide the Bank of England with assets of greater value than the government bonds they will receive
British banks have become increasingly unwilling to make loans, even to each other, as a result of the credit crisis, which was triggered by massive losses for banks involved in the US sub-prime mortgage market. In the US, the Federal Reserve took similar action with a $200bn programme to boost liquidity in financial markets last month.
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