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British announce further bank rescue amid record losses
Published in Saudi Press Agency on 19 - 01 - 2009


The British government Monday launched a second
multibillion-pound package to stabilize banks aimed at unfreezing
credit markets, as the Royal Bank of Scotland (RBS) announced what
would be the largest loss in British corporate history, reported dpa.
Prime Minister Gordon Brown said he was confident that the new
measures would kickstart lending by banks which had, among other
factors, suffered from the "retrenchment of many overseas banks back
to their home markets and the withdrawal of non-banking financial
institutions from funding."
Brown, pressed by journalists to concede that last October's
massive bail-out package had "failed," said: "Our action in October
was to stop the collapse of banks. This is about the expansion of
credit."
RBS revealed that it is expecting to write down assets by as much
as 20 billion pounds (29.5 billion dollars), following a review of
acquisitions including a share of Dutch bank ABN Amro.
In addition, the bank's full-year 2008 losses could reach 8
billion pounds, bringing total losses to 28 billion pounds - the
biggest in British corporate history.
Among the measures set out by Chancellor of the Exchequer Alistair
Darling is a massive insurance scheme to protect banks from so-called
toxic assets, a move it is hoped will encourage institutions to
restart lending to businesses and households.
Brown also announced a new Bank of England fund, worth up to 50
billion pounds, to buy high-quality government bonds in a bid to
increase lending to companies with an annual turnover of more than
500,000 pounds.
It is the second bail-out for the banks in the space of just three
months. A banking recapitalization programme announced in October had
failed to provide a sufficient platform for normal lending to resume.
In recent days, banking shares have again been falling sharply,
amid fears that the banks were set to reveal further massive write-
downs.
As part of Monday's scheme, the government stake in Royal Bank of
Scotland (RBS) rose from 58 per cent to nearly 70 per cent.
RBS's loss would easily exceed the previous largest British
corporate loss, telecoms firm Vodafone's 15-billion-pound negative in
2006.
Brown said he was "angry" at RBS for incurring such large losses
due to taking "irresponsible risks" on the US subprime market and
with the takeover of ABN Amro in 2007.
Meanwhile, a new "superbank" - Lloyds Banking Group - started
trading Monday with a pledge to cut costs by at least 1.5
billion pounds a year by 2011.
The new banking giant, created through an emergency merger between
Lloyds TSB and HBOS, one of Britain's major mortgage lenders, will
have a staff of 145,000 at 3,000 branches across Britain.


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