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Saturday, January 17, 2009

More on new UK Bank Bailout

by Calculated Risk on 1/17/2009 08:14:00 PM

From The Times: Treasury’s £100bn lifeline

THE Treasury will tomorrow drastically revise the terms of last October’s bank bailout and say it will guarantee at least £100 billion of new lending.
Three key proposals are being finalised. The government will offer guarantees on new consumer loans, outline plans to ringfence “toxic” assets on bank balance sheets and propose to refinance the preference shares that were used to rescue Royal Bank of Scotland and HBOS.

The taxpayer’s stake in Royal Bank of Scotland could jump from 57.9% to about 70% as part of the deal.
Tomorrow’s announcements will centre on measures to get the banks through the crisis and to boost lending. The existing Bank of England Special Liquidity Scheme (SLS), which has provided the banks with £200 billion of liquidity over the past nine months, will expire on January 30. But officials say there will be a “son of SLS”, to replace it and ensure liquidity does not dry up.
There has been intense speculation that the government plans to set up a “bad bank” to take so-called toxic assets off the banks’ books and put them in a new taxpayer-owned entity, to be sold on when economic conditions improve.

Officials, however, played this down. “There will be no announcement of a bad bank next week,” one well-placed Whitehall official said.
It sounds like the details will be released on Monday, and will include more capital for banks and a Government guarantee for new lending ... but no "bad bank".