Banking

The Government has this morning announced the details of its plans to help the financial markets, which include supporting the recapitalisation of eight major lenders.

The firms initially involved in the scheme Abbey, Barclays (LSE: BARC.L - news) , HBOS (LSE: HBOS.L - news) , HSBC Bank, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland (LSE: RBS.L - news) and Standard Chartered (LSE: STAN.L - news) will have capital facilities available from the Government in return for preferential shares.

These institutions have committed to the Government that they will increase their total Tier 1 capital by £25bn, and have pledged to do so by the end of the year. The Treasury has invited applications from other eligible institutions, namely UK incorporated banks - including UK subsidiaries of foreign institutions - which have a substantial business in the UK and building societies.

Other measures include at least £200bn being made available to banks through the Special Liquidity Scheme. The Bank (NASDAQ: TBHS - news) of England will continue to conduct auctions to lend sterling for three months, and US dollars for one week, until markets stabilise.

The Bank will next week bring forward its plans for a permanent regime underpinning banking system liquidity, including a Discount Window facility. The Government has also suggested launching a Government-backed English incorporated company to make available to banks and building societies a Government guarantee of new short and medium term debt issuance worth around £250bn - to assist in refinancing maturing, wholesale funding obligations.

The European Commission has been informed of the proposals, and the Government said it was now working with other countries about the possibility of extending the plans, and working together to strengthen the international system.