|UK Treasury, Whitehall, London.
The UK government said today it will invest about £50 billion to shore up the UK banking system; the Bank of England will make at least £200 billion available to banks and the State will provide a guarantee of £250 billion.
The government will buy preference shares, and the Bank of England will make at least £200 billion available for banks to borrow under a special liquidity plan, the Treasury said in a Regulatory News Service statement today. The government will also provide a guarantee of about £250 billion to help refinance debt.
The steps to partially nationalize the banking industry provide ``the necessary building blocks to allow banks to return to their basic function of providing cash and investment for families and businesses,'' Chancellor of the Exchequer Alistair Darling said in a statement.
Following discussions convened by the Treasury, the following major UK banks and the largest building society have confirmed their participation in a Government-supported recapitalisation scheme.
These institutions comprise:
HSBC Bank plc
Nationwide Building Society
Royal Bank of Scotland
These institutions have committed to the Government that they will increase their total Tier 1 capital by £25bn.
This is an aggregate increase and individual increases will vary from institution to institution. In order to facilitate this process the Government is making available £25bn to be drawn on by these institutions if desired to assist in this process as preference share capital or PIBS and is also willing to assist in the raising of ordinary equity if requested to do so. The above institutions have committed to the Government that this will be concluded by the end of the year.
The amount available to each bank will vary and will depend on their dividend payouts, executive pay policies and will require the banks to lend to small businesses and home owners, the government said.