GORDON Brown will announce a further emergency bank bail-out totalling more than £100billion next week, it emerged last night.
The desperate measure, which will raise the taxpayer’s liability to more than £250billion, came as a report warned that Britain’s banks are technically insolvent.
The report, from analysts at Royal Bank of Scotland, said the credit crunch showed little signs of easing. In an indication of the extent of the problem, the report was titled Living on a Prayer.
Banks had so little capital to lend, they were effectively insolvent, it said. It was a situation “not unusual” in an economic downturn, but showed little sign of abating in the coming months.
The Treasury and Downing Street refused to discuss the bail-out plan yesterday.
But details leaked out after the Prime Minister met Bank of England governor Mervyn King and Financial Services Authority chairman Lord Turner at Number 10.
Treasury sources indicated that an extra £108billion of public money will be used to guarantee loans and mortgages. Officials will be hammering out details over the weekend.
The move follows increasing fears that Mr Brown’s part nationalisation of the banks has failed to ease the credit crisis. Jitters swept the City again yesterday.
Barclays, which turned down Government aid last year, saw its shares lose almost a quarter of their value in an hour. RBS shares fell by more than 16 per cent.
Sir John Gieve, deputy governor of the Bank of England, warned business leaders that little can be done to prevent the economy suffering the worst recession for decades.
Saturday January 17,2009
Source: Daily Express