UK: Government to save HBOS and RBS

Government set to become biggest shareholder in top banks as Japanese weigh bid for Morgan Stanley

THE government will launch the biggest rescue of Britain’s high-street banks tomorrow when the UK’s four biggest institutions ask for a £35 billion financial lifeline.

The unprecedented move will make the government the biggest shareholder in at least two banks.

Royal Bank of Scotland (RBS), which has seen its market value fall to below £12 billion, is to ask ministers to underwrite a £15 billion cash call.

Halifax Bank of Scotland (HBOS), Britain’s biggest provider of mortgages, is seeking up to £10 billion.

Lloyds TSB, which is in the process of acquiring HBOS in a rescue merger, wants £7 billion, while Barclays needs £3 billion.

The scale of the fundraising could lead to trading at the London stock market being suspended. This would give time for the market to digest the impact of the moves.

Read moreUK: Government to save HBOS and RBS

IMF in global meltdown warning

Strauss-Kahn said rich nations had so far failed to restore confidence

The world financial system is teetering on the “brink of systemic meltdown”, the head of the International Monetary Fund (IMF) has warned in Washington.

Dominique Strauss-Kahn said rich nations had so far failed to restore confidence, but he endorsed a new action plan by the G7 group.

He also said the IMF was ready to lend to countries in dire need of capital.

The 15 eurozone leaders will meet in Paris later to try to establish a common approach to the markets crisis.

French President Nicolas Sarkozy and German Chancellor Angela Merkel said they would present a number of proposals at the summit to ease the credit freeze that has caused the collapse of several leading international banks.

But after meeting in Paris on Saturday, the two leaders said the summit would not result in a joint financial rescue fund for Europe, in the model of a $700bn rescue by the US government.

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Brown and Darling commit £500 billion for bank bailout

Gordon Brown and Alistair Darling set out a radical £500 billion package today to restore confidence in the UK banking sector and break the crippling logjam in credit markets.

The three-part package includes committing up to £50 billion of taxpayer funds for a partial nationalisation of stricken banks, met from increased public borrowing and with political strings attached that would include reining in executive pay.

In addition, the Bank of England will pump at least £200 billion into the money markets under its existing Special Liquidity Scheme. The Government is also making a further £250 billion available for banks over the next three years to guarantee medium-term debt to help restore confidence and get banks lending to each other again.

Read moreBrown and Darling commit £500 billion for bank bailout

Bank shares plunge again in panicky trading

Shares in Britain’s banks plunged again amid panicky trading following emergency talks with the government over a possible injection of billions of pounds of taxpayers’ money into the banking sector.

Royal Bank of Scotland nosedived by almost 40% to 90p in morning trading – its lowest point since the recession of the early 1990s. Barclays, Lloyds TSB and HBOS were also hit, as the lack of a coordinated rescue plan for the banking sector alarmed the City.

By 3pm RBS shares were 32.5% lower at 112p, giving it a market capitalisation of £15.98bn – down from over £75bn a year ago.

HBOS was 23% lower at 124p and Lloyds TSB had lost 13% to 225p. Barclays had recovered most of its early losses following Varley’s comments this morning.

Last night Britain’s bank bosses met with chancellor Alistair Darling, to discuss a possible £50bn injection of equity. They are due to meet again at the Treasury this afternoon.

The talks centre on the idea of a part-nationalisation of the banking system through the injection of capital into the banks via preference shares, which take precedence over ordinary shares during a liquidation, but do not give the holders any voting rights.

Read moreBank shares plunge again in panicky trading

Financial Crisis: Rush for gold as savers queue for bullion

Savers have been queuing in the street to buy gold bars and coins, as they search for a safe place to invest their money.


Traditionally, gold has been one of the safest investments during times of financial turmoil Photo: AP

London’s two leading bullion dealers, ATS Bullion and Baird & Co, have reported a rush of interest from savers, many of whom have hundreds of thousands of pounds worth of savings they want to convert into the precious metal.

Related article: US Mint halts some American Eagle coin production

At least two customers have invested the entire proceeds from selling their houses into gold, each buying up more than £500,000-worth of gold bars, according to one dealer.

Savers have been queuing in the street at ATS Bullion, whose offices are just off the Strand in London’s west end.

Read moreFinancial Crisis: Rush for gold as savers queue for bullion

Financial crisis: Stock market suffers its worst fall in history

The UK stock market has suffered its worst one-day fall in history as the banking crisis intensified.

The FTSE-100 index of Britain’s biggest companies dropped by 391.06 points – its steepest ever fall – to end the day down 7.9 per cent.

The FTSE’s tumble was mirrored across Europe, as markets in France, Germany, Italy and Spain all recorded heavy falls.

On Wall Street, the panic drove the Dow Jones Industrial Average down through the 10,000 level for the first time in four years. The Dow was off 4.6 per cent at 9580.68 by lunchtime in New York as the Standard & Poor’s 500 index lost 5 per cent. The mild euphoria that greeted the passage of the $700bn bail-out of Wall Street on Friday evaporated as traders digested the more bad news from Europe.

A statement by Alistair Darling, the Chancellor, to Parliament failed to calm nerves with the stock market taking a further dive as he spoke.

The Chancellor refused to outline firm plans to deal with the crisis – however, he confirmed the Government was working on a radical scheme which could be implemented in the coming weeks.

Read moreFinancial crisis: Stock market suffers its worst fall in history

Government will spy on every call and e-mail

Ministers are considering spending up to £12 billion on a database to monitor and store the internet browsing habits, e-mail and telephone records of everyone in Britain.

GCHQ, the government’s eavesdropping centre, has already been given up to £1 billion to finance the first stage of the project.

Hundreds of clandestine probes will be installed to monitor customers live on two of the country’s biggest internet and mobile phone providers – thought to be BT and Vodafone. BT has nearly 5m internet customers.

Ministers are braced for a backlash similar to the one caused by their ID cards programme. Dominic Grieve, the shadow home secretary, said: “Any suggestion of the government using existing powers to intercept communications data without public discussion is going to sound extremely sinister.”

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Europe fights financial storm as bank deal collapses


Nicolas Sarkozy (C) flanked by Angela Merkel (L) and Gordon Brown

PARIS (AFP) – The leaders of Europe’s four main economic powers vowed to protect fragile banks in their fight against the global credit crisis as the biggest rescue in German financial history collapsed.

France, Germany, Britain and Italy put on a united front, promising a more coordinated approach to the credit crunch, although Germany’s Chancellor Angela Merkel insisted states would mainly act individually.

Read moreEurope fights financial storm as bank deal collapses

Financial crisis: Mortgage lending plunges 95 per cent as housing market suffers

The value of mortgages lent to British homebuyers fell 95 per cent last month, according to the Bank of England.


Mortgage approvals hit a record low after banks tightened lending Photo: PA

It said mortgage lending dived to just £143 million during August – its lowest since this data was first collected in April 1993 and a fraction of the £2.998 billion lent in July.

The bank also revealed that mortgage approvals fell to 32,000 last month from 33,000 in July.

While marginally higher than analyst forecasts, it was the lowest since data began being collected and means approvals are running at less than a third of their 109,000 total in August 2007.

Read moreFinancial crisis: Mortgage lending plunges 95 per cent as housing market suffers

World War III

FIGHTER jets, infantry troops, destroyers and submarines will converge on Wales next month for one of the largest military exercises of all time.

The two-week exercise – codenamed Joint Warrior – is designed to recreate a scenario in which Britain and other sovereign nations go to war against a “state-sponsored terrorist movement” – using a vast array of lethal modern weapons.

Taking place between October 6 and October 16, it will provide coordinated training for all three UK Armed Services, plus forces from EIGHT allied nations.

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