Britain to inject up to $87.2 billion into UK banks
Britain will inject up to 50 billion pounds ($87.2 billion) of government money into the country’s banks as part of a multibillion pound package to shore up the financial system.
After frantic overnight talks that followed dramatic falls in the share prices of some of Britain’s biggest banks, Finance Minister Alistair Darling rushed out measures Wednesday he said would help boost lending and restore confidence.
“This is beginning a process of un-bunging a big problem where banks won’t lend to each other for long periods,” Darling said.
Under the plans, Britain will inject new capital into the banks in the form of preference shares or similar instruments, and make available at least 200 billion pounds of liquidity in a bid to free up lending in the banking system.
The decision follows days of crippling pressure on British banks, some of which have lost nearly half their value on the stock market amid investor fears they could collapse if they are not handed a massive liquidity lifeline (pay day loan).
HBOS, which last month agreed to be taken over by rival Lloyds in a government-brokered deal, welcomed the plan.
“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 believes that this initiative is very much in the interests of its shareholders and customers.”