Britain set to unveil rescue package for banks
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Finance Minister Alistair Darling (pictured) is to announce a bank-rescue plan Wednesday. Late Tuesday, he, Prime Minister Gordon Brown and the heads of Britain's central bank and financial regulator held a meeting on a response to the crisis.
Britain was set to announce a rescue package for its ailing banking industry before markets open on Wednesday, the day after shares in leading banks plunged on concerns they were short of capital.
After a crisis meeting with Prime Minister Gordon Brown and the heads of Britain's central bank and financial regulator late Tuesday, finance minister Alistair Darling said he would make a detailed announcement within hours.
Media reports said the package was worth up to 50 billion pounds (90 billion dollars, 65 billion euros), and would involve so-called recapitalisation -- a cash injection in return for shares to help banks weather the credit crunch.
"The Bank of England has been putting substantial sums into the markets today, and is ready to do more when that's needed," Darling said.
"We've been working closely with the governor of the Bank of England, with the Financial Services Authority and financial institutions to put the banks on a longer-term sound footing."
His statement came after shares in some of Britain's leading banks plummeted on reports that the Royal Bank of Scotland (RBS), Barclays and Lloyds TSB had met with Darling to request emergency funding.
Despite denials from RBS and Barclays, RBS stock plunged more than 40 percent, hitting a 13-year-low in early trading and improving only slightly at close. Barclays and Lloyds TSB suffered smaller but still substantial losses.
John Cridland, director-general of the Confederation of British Industry (CBI), said Darling's "much anticipated announcement of capitalisation will herald the first essential step on the road to financial recovery".
Newspapers also welcomed the move, although many condemned what they saw as the government's "dithering" since news of the rescue, which will see the effective part-nationalisation of a raft of banks, was first leaked on Sunday.
The Financial Times said that if 50 billion pounds "is sufficient, it would be a price worth paying for stabilising the banking system".
But others were more cautious. Richard Hunter, head of equities at stockbroker Hargreaves Lansdown, warned: "Anything less than a clear, over-arching plan will be received with more scepticism."
Nick Clegg, leader of England's third party, the Liberal Democrats, added: "This announcement must be bold, clear and big enough to stop the downward spiral of crippling uncertainty in our financial markets."
RBS stock has now fallen about 80 percent in the year since the credit crunch began with the collapse of the US subprime home loan market.
Just 12 months ago, the bank was riding high, leading a consortium in an attempted 100-billion-dollar takeover of Dutch bank ABN Amro.
Now however, it appears at risk of becoming the next victim of the global credit crunch that has seen Britain nationalise two lenders this year alone.
Northern Rock became the first casualty when it made a request for emergency funding in September 2007 before being nationalised in February. Bradford & Bingley was taken into government control last month.
Several other countries have announced rescue plans for their banking industries, most notably in the United States, where legislators approved a 700-billion-dollar plan last week.
Russia on Tuesday announced an agreement to provide around 36 billion dollars worth of credit for at least five years.
Several European countries meanwhile, have said they will fully guarantee depositors' savings from banks that go bust.
Britain has extended its savings protection but pressure is growing for a full guarantee amid fears for the savings of thousands of British customers of Icesave, the online arm of a major Icelandic bank nationalised Tuesday.
Finance ministers from the Group of Seven rich countries are due to meet in Washington this week to discuss how to tackle the crisis.
Separately, Australia's central bank cut its interest rate by an unexpected full percentage point and US Federal Reserve Chairman Ben Bernanke hinted the central bank could cut its main interest rate.
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