HM Treasury Confirms Financial Support For Banks
Yesterday, the Treasury announced proposals to support the banking industry in these difficult times. The initiatives are meant to provide sufficient liquidity in the short term; to make new capital available to UK banks and building societies therefore strengthening their resources and enabling them to restructure their finances while maintaining their support for the real economy; and to ensure that the banking system has the funds necessary to maintain lending in the medium term.
Commenting on the announcement, the Governor of the Bank of England, Mervyn King, said: “A major recapitalisation of the UK banking system of at least £50 billion is a necessary condition for regenerating confidence in the financial system. The recapitalisation, further liquidity support from the Bank of England, and the new guarantee scheme, amount to a significant step forward in resolving the present crisis”.
In these extraordinary market conditions, the Bank of England will take all actions necessary to ensure that the banking system has access to sufficient liquidity. In its provision of short term liquidity, the bank will extend and widen its facilities in whatever way is necessary to ensure the stability of the system.
As part of the government’s announcements and to that end, at least £200 billion will be made available to banks under the Special Liquidity Scheme. Following discussions convened by the HM Treasury, seven major UK banks and the largest building society have confirmed their participation in the scheme. These institutions comprise Abbey, Barclays, HBOS, HSBC Bank plc, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered. The money is being made immediately available to these institutions in recognition of their commitment to strengthen their aggregate capital position.
Date: 9th, October, 2008
Author: Ben Wilkie
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