News Article - 23 May 2012
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A £50 billion package to rescue the banking system has been unveiled by the government.

Eight of the UK's largest financial institutions will initially receive capital, with others able to apply later.

The government will receive preference shares in the institutions which have signed up to the plan, which means it will be paid a fixed rate of interest before any other shareholders, although without voting rights.

A further £200 billion will come from the Bank of England to improve business health by encouraging short-term borrowing to provide liquidity to banks and building societies.

"This is beginning a process of un-bunging a big problem where banks won't lend to each other for long periods," said the chancellor, Alistair Darling.

A special company is also to be set up which provide loan guarantees of up to £250 billion to the institutions, in an attempt to get them to begin lending to each other again.

Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered are the initial eight to take part in the plan.

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