Darling announces new government rescue plan

08/10/2008

The government announced its plan to rescue the credit crunch-hit banking sector today, in a bid to stave off a severe economic recession.

Chancellor of the exchequer Alistair Darling said that taxpayers' money would be used to buy shares in major financial firms, in order to boost confidence.

Eight banks are involved in the scheme - Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide, Royal Bank of Scotland and Standard Chartered.

Others can also apply to take part.

The major advantage of the scheme is that it provides a guaranteed source of easy funding for banks.

However, the sheer scale of the plan - which will probably cost more than £50 billion - runs the risk of spooking investors still further.

"[The banks have] got additional capital now if they want it, they've got an unlimited source of liquidity," Terry Smith, chief executive at broker Tullett Prebon, told the BBC.

"That certainly should stop the panic in terms of people wondering whether or not the banks are safe."

London's flagship stock index, the FTSE 100, has fallen so far today - despite the Bank of England's announcement at midday that it would be reducing interest rates.

Tags; Current UK Economy, Young Family Finances, Retirement Money Problems, Credit Card Lifestyle, Recent Graduate Debt,

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