Darling launches £50bn relube of bunged-up UK banks
Union slams 'disgraceful behaviour' of bank bosses
The UK government has announced a dramatic £50bn part-nationalisation plan for the country’s struggling banking system.
Eight of Blighty’s biggest banks and building societies will be handed the extra capital. Some had earlier urged UK.gov to put together a rescue package after taking a hammering in the City.
The government will receive preference shares in Abbey, Barclays, Halifax Bank of Scotland (HBOS), HSBC*, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered.
Taxpayers’ money will be used to buttress the banking system, following weeks of tumbling share prices in the sector amidst a deepening credit freeze.
A further £200bn will be injected into the banking system by the Bank of England, as part of the rescue package, for short-term borrowing to provide liquidity to lenders.
In addition, a special company will be set up to provide £250bn in loan guarantees to banks and building societies.
"This is beginning a process of un-bunging a big problem where banks won't lend to each other for long periods," said Chancellor Alistair Darling, who will be making a statement to Parliament later today.
Other lenders will also be able to apply for inclusion in the plan, said the Treasury.
"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," said the UK’s largest mortgage lender, HBOS. Last month it was thrown a £12.2bn lifeline from Lloyds TSB.
Meanwhile, Unite - the country’s largest union - today slammed bank bosses for their “disgraceful behaviour, which has brought a highly profitable industry to the brink of collapse”.
Unite said it will develop a charter to fight for jobs in finance, it will hold an emergency meeting today about the current financial crisis.
“Following the takeover of HBOS by Lloyds TSB and the part nationalisation of Bradford and Bingley, the union is warning employers that they will not accept compulsory redundancies in the banking industry,” it said.
The union wants its 180,000 members who work in the financial services market to lobby for a major overhaul of the banking system, and it will be calling for “tougher regulatory requirements”. It also wants the government to halt outsourcing of finance work.
Just last week reports suggested that HBOS could be considering moving as many as 2,000 back office and IT jobs to India as part of its cost-cutting plans.
"There are hundreds of thousands of staff working for the financial services in branches, call centres and back offices right across the country. They are not the culprits of the credit crunch and we are not prepared to allow them to become the victims,” said Unite deputy general secretary Graham Goddard. ®
*HSBC put out a statement this morning in which it distanced itself from the government's part-nationalisation plans.
"Consistent with the objectives of the UK scheme announced today, HSBC will ensure that our principal UK subsidiary, HSBC Bank plc, continues to be appropriately capitalised, funded from the group’s internal resources," it said.
"HSBC therefore has no current plans to utilise the UK recapitalisation initiative."