Guide to SOME OF THE BEST SAVINGS RATES available from banks and building societies
Personal Loan Tips, Credit Card Deals & UK Debt Figures
Mortgage Tips
Money Saving Tips, Motoring,Finance,Household,Insurance & Many More!
Definitive Guide to ISAs
Guide to Person to Person Lending, Peer to Peer Lending,Social Lending
List of all UK Building Societies
10 Savings Accounts to start Carpetbagging if you are lazy
Building Society & Banks News Items & Information
Carpetbagging Q/A
Money Statistics (Debt Figures,Saving Ratios,House Prices and more)
Debt Reduction and Debt Elimination Tips
Useful Tools. Budget Calculators,Loan Calculators,Interest Calculators
Details of the Financial Services Compensation Scheme(Bank Compensation Scheme)
Famous Money Quotes & Sayings, Money Jokes & Humour from across the globe
Optical illusions,Quizzes!!!
Blog(Are your savings beating inflation?zopa)
Guest Book & Comments

08 October 2008

Financial support to the banking industry

After consultation with the Bank of England and the Financial Services Authority, the Government announces that it is bringing forward specific and comprehensive measures to ensure the stability of the financial system and to protect ordinary savers, depositors, businesses and borrowers. 

In summary the proposals announced today are intended to:

  • Provide sufficient liquidity in the short term; 
  • Make available new capital to UK banks and building societies to strengthen their resources permitting them to restructure their finances, while maintaining their support for the real economy; and 
  • Ensure that the banking system has the funds necessary to maintain lending in the medium term.

In these extraordinary market conditions, the Bank of England will take all actions necessary to ensure that the banking system has access to sufficient liquidity. In its provision of short term liquidity the Bank will extend and widen its facilities in whatever way is necessary to ensure the stability of the system. At least £200 billion will be made available to banks under the Special Liquidity Scheme.  Until markets stabilise, the Bank will continue to conduct auctions to lend sterling for three months, and also US dollars for one week, against extended collateral. It will review  the size and frequency of those operations as necessary. Bank debt that is guaranteed under the Government's guarantee scheme will be eligible in all of the Bank's extended-collateral operations.  The Bank next week will bring forward its plans for a permanent regime underpinning banking system liquidity, including a Discount Window facility.
In addition the Government is establishing a facility, which will make available Tier 1 capital in appropriate form (expected to be preference shares or PIBS) to “eligible institutions”.  Eligible institutions are UK incorporated banks (including UK subsidiaries of foreign institutions) which have a substantial business in the UK and building societies. However applications are invited for inclusion as an eligible institution from any other UK incorporated bank (including UK subsidiaries of foreign institutions).  In reviewing these applications the Government will give due regard to an institution’s role in the UK banking system and the overall economy.

Following discussions convened by HM Treasury, the following major UK banks and the largest building society have confirmed their participation in a Government-supported recapitalisation scheme.  These institutions comprise:

  • Abbey 
  • Barclays
  • HBOS
  • HSBC Bank plc
  • Lloyds TSB
  • Nationwide Building Society
  • Royal Bank of Scotland
  • Standard Chartered

These institutions have committed to the Government that they will increase their total Tier 1 capital by £25bn.  This is an aggregate increase and individual increases will vary from institution to institution.  In order to facilitate this process the Government is making available £25bn to be drawn on by these institutions if desired to assist in this process as preference share capital or PIBS and is also willing to assist in the raising of ordinary equity if requested to do so.  The above institutions have committed to the Government that this will be concluded by the end of the year.

In addition to this, the Government stands ready to provide an incremental minimum of £25bn of further support for all eligible institutions, in the form of preference shares, PIBS or, at the request of an eligible institution, as assistance to an ordinary equity fund-raising.

The amount to be issued per institution will be finalised following detailed discussions. If the Government is to provide the capital, the issue will carry terms and conditions that appropriately reflect the financial commitment being made by the taxpayer.  In reaching agreement on capital investment the Government will need to take into account dividend policies and executive compensation practices and will require a full commitment to support lending to small businesses and home buyers.

The Government will take decisive action to reopen the market for medium term funding for eligible institutions that raise appropriate amounts of Tier 1 capital.

Specifically the Government will make available to eligible institutions for an interim period as agreed and on appropriate commercial terms, a Government guarantee of new short and medium term debt issuance to assist in refinancing maturing, wholesale funding obligations as they fall due.  Subject to further discussion with eligible institutions, the proposal envisages the issue of senior unsecured debt instruments of varying terms of up to 36 months, in any of sterling, US dollars or Euros. The current expectation is that the guarantee would be issued out of a specifically designated Government-backed English incorporated company. The Government expects the take-up of the guarantee to be of the order of £250bn, and will keep this under review alongside ongoing monitoring of capital positions and lending volumes.

To qualify for this support the relevant institution must raise Tier 1 capital by the amount and in the form the Government considers appropriate whether by Government subscription or from other sources.  It is being made available immediately to the eight institutions named above in recognition of their commitment to strengthen their aggregate capital position.

The Government has informed the European Commission of these proposals and is actively talking to other countries about extending these proposals and has committed to work together with them to strengthen the international system. 

The Government is moving ahead immediately with the internationally agreed proposal for colleges of supervision and other measures to improve supervision of the system. After discussions with the major economies at the G7 meeting on Friday, the Government and other countries agreed on the need for a meeting at heads of Government level.

Press Release from HM Treasury

Address to the Nation by H.E. Geir H. Haarde, Prime Minister of Iceland


Fellow Icelanders

I have requested the opportunity to address you at this time when the Icelandic nation faces major difficulties.

The entire world is experiencing a major economic crisis, which can be likened in its effects on the world’s banking systems, to an economic natural disaster. Large and well established banks on both sides of the Atlantic have become victims of the recession and governments in many countries are rowing for all they are worth to save whatever can be saved. In such circumstances every nation thinks, of course, first and foremost of its own interests. Even the biggest economies in the world are facing a close struggle with the effects of the crisis.

The Icelandic banks have not escaped this banking crisis any more than other international banks and their position is now very serious. In recent years the growth and profitability of the Icelandic banks has been like something akin to a fairy tale. Major opportunities arose when the access to capital on foreign money markets reached its peak, and the banks together with other Icelandic companies, exploited these opportunities to launch into new markets.

Over this period the Icelandic banks have grown hugely and their liabilities are now equivalent to many times Iceland’s GNP. Under all normal circumstances larger banks would be more likely to survive temporary difficulties, but the disaster which is now engulfing the world is of a different nature, and the size of the banks in comparison with the Icelandic economy is today their main weakness.

When the international economic crisis began just over a year ago with the collapse of the real estate market in the US and chain reactions due to the so-called sub-prime loans, the position of Icelandic banks was considered to be strong, as they had not taken any significant part in such business. But the effects of this chain of events, have turned out to be more serious and wide ranging than anyone had expected.

In recent weeks the world’s financial system has been subject to devastating shocks. Some of the biggest investment banks in the world have become the victims and capital in the markets has in reality dried up. The effects have been that large international banks have stopped financing other banks and complete lack of confidence has developed in business between banks. This has caused the position of Icelandic banks to deteriorate very rapidly in the last few days.

Fellow Icelanders

The Government of Iceland, the Central Bank and the Financial Supervisory Authority have over the past days and weeks worked ceaselessly to find a solution to the enormous difficulties which threaten Icelandic banks, in good cooperation with the banks. Various parties have been involved in this work, for example the pension funds and representatives of the labour market. The Government has, for its part, aimed for the sale by Icelandic banks of foreign assets and a reduced presence abroad, so that the Icelandic state, so small in comparison with the Icelandic banks, would have the capacity to support them. We should bear in mind in this connection that the huge measures introduced by the US authorities to rescue their banking system represent just under 5% of GNP. The total economic weight of the Icelandic banks, however, is many times the GNP of Iceland.

Thus a decision on wide-ranging rescue measures for the Icelandic banks is not only a matter of tax payers shouldering a heavier load temporarily, but concerns the position and future of the Icelandic nation as a whole.

The Government has stated that it will do what is in its power to support the banking system. With this aim in view many important steps have been made over recent weeks and months. But in the perilous situation which exists now on the world’s financial markets, providing the banks with a secure life line poses a great risk for the Icelandic nation. People must bear this in mind when there is talk about the Icelandic state taking on loans of thousands of billions to defend the banks in the rough waters which they now find themselves in. There is a very real danger, fellow citizens, that the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could be national bankruptcy. No responsible government takes risks with the future of its people, even when the banking system itself is at stake. The Icelandic nation and its future takes precedence over all other interests.

Over the weekend there were virtually continuous meetings on the state of the financial system. I can assure you that everyone who took part tried their absolute best to find an arrangement so that the operations of the banks and investment institutions could continue today and the result of the weekend’s work was that yesterday evening the banks would be able to continue operations for the moment. For this reason I said yesterday evening that it was my judgement and that of the Government that there was no reason to introduce special measures on our behalf. No responsible government introduces dramatic measures on the banking and financial system of the nation unless all other courses are closed.

The position has today altered completely and for the worse. Major credit lines to the banks have been closed and it was decided this morning to suspend trading with the banks and with the savings funds in the Icelandic Stock Exchange.

We now need responsible and measured reactions. I will present immediately a bill to parliament which will allow the exchequer to address the current situation on the financial markets. I have spoken to the opposition parties and received assurance that the bill will be passed today. I would like to thank them for their cooperation.

By making these changes in legislation we will adapt the banking system to Icelandic circumstances and rebuild the trust of foreign operators in Icelandic banking and financial operations. If the bill is passed today it can be assumed that the measures will come immediately into force.

I would like to diffuse all doubt that deposits by Icelanders and private pensions savings in all Icelandic banks are secure and the exchequer will ensure that such deposits are reimbursed to savers in full. No one need be in any doubt on this. The authorities will also ensure that the countries businesses have access to capital and banking services to the maximum extent possible.

Fellow countrymen

I am well aware that this situation is a great shock for many, which raises both fear and anxiety. In such circumstances it is extremely urgent that the authorities, companies, social organisations, parents and others who can contribute make every effort to ensure that daily life is not disrupted.

If there was ever a time when the Icelandic nation needed to stand together and show fortitude in the face of adversity, then this is the moment. I urge you all to guard that which is most important in the life of everyone of us, protect those values which will survive the storm now beginning. I urge families to discuss together and not to allow anxiety to get the upper hand even tough the outlook is grim for many. We need to explain to our children that the world is not on the edge of a precipice and we all need to find an inner courage to look to the future.

Despite this major setback the future of the nation is both sure and bright. What is most important is that the foundations of our society and the economy are solid, even though the superstructure has given way in the face of the present disaster. We have natural resources, both on sea and land, which will ensure us a good living whatever happens. Our level of education and the human resources which we have here are no less enviable in the eyes of other nations than our natural resources. By the same token, we will have the opportunity to rebuild the financial system. We have learnt from those mistakes which were made during that period of massive growth and that experience will prove to be valuable when put to the test. With a common effort and with that optimism which characterises the Icelandic people, we will emerge from these difficulties and make a new and energetic come-back.

Fellow Icelanders

The task of the authorities over the coming days is clear: to make sure that chaos does not ensue if the Icelandic banks become to some extent non-operational. For this the authorities have many options and they will be used. Both in politics and elsewhere it will be important to sheathe our swords. It is very important that we display both calm and consideration during the difficult days ahead, that we do not lose courage and support each other as well as we can. Thus with Icelandic optimism, fortitude and solidarity as weapons, we will ride out the storm.

God bless Iceland.

Reykjavík, 6 October 2008

1/10/2008  Irish government  announced that it will guarantee deposits 100% in its banks for the next 2 years.  Anglo Irish Bank offer 12 month fixed rate bond @7.05%,  a 7 day notice account @ 6.55%, 9 month fixed rate bond @ 7% or Easy Access Account @ 6.40% for UK residents

28/09/2008 Belgian and Dutch Financial officials meeting to sort out problems at Fortis Bank. (Reuters) - Fortis faced a takeover or break-up as European Central Bank President Jean-Claude Trichet held emergency talks with Dutch and Belgian lawmakers to restore faith in the Belgian-Dutch financial group.Trichet, who as ECB head is responsible for safeguarding financial stability in the euro zone, joined Belgian Prime Minister Yves Leterme in Brussels in a bid to secure the future of Fortis, including a partial or full sale or some form of state intervention, a source familiar with the situation said.

27/09/2008 According to the BBC Bradford and Bingley is to be nationalised.         Reuters - The government will nationalize troubled mortgage lender Bradford & Bingley and is discussing the sale of its savings book and branches, people in the banking industry familiar with the matter said.The Treasury is leading talks on the rescue of the bank and on Sunday said discussions were continuing. A full statement will be made by the Chancellor  before Monday's market opening.The Treasury would have preferred a private-sector rescue for Britain's ninth-biggest mortgage provider, but rivals appear unwilling to come in as a "white knight" amid a global credit crisis and weakening housing market

Details on 3 more news stories about building society mergers added to news page.

20/09/2008 Newbury Building Society launching fixed term account £5000+ 6.30%.

18/09/2008 With the collapse of LEHMAN BROTHERS and the HBOS position (139 billion of deposits) i have been getting quite a few emails from people asking how safe are their savings. So to try and help to explain the situation should a bank or building society fail i have added a page about the Financial Services Compensation Scheme (Bank Compensation Scheme) which is worth reading.

8/09/2008 Cheshire and Derbyshire to be taken over by Nationwide. No payouts or member votes!!!

Catholic Building Society Payouts Announced. Further details on Building Society News Page. 

25/08/2008 Details on 3 more news stories about building society mergers added to news page. 

One million Norwich Union policyholders are in line to get a windfall of between £400 and £3500. (more on news page)
For those who want it act fast as this is in line with current market trends of reducing rates on fixed rate bonds.

ICICI 12 MONTH BOND £1000+ 7.20% AER
Coventry Building Society  12 Month Bond 6.30% £1+. (21/08/2008)
Norwich & Peterborough Building Society E SAVER ACCOUNT £100 INSTANT ACCESS 6.30%.......LIMITED OFFER!!!!!!!!!!!
Catholic Building Society to merge with Chelsea Building Society

Contact us

Nothing within this Website is, or shall be deemed to constitute, financial or other advice. Any and all information provided within the Website is for general information purposes only. We recommend that independent professional advice is obtained before you purchase any product and/or service.