Monday, January 19, 2009

Britain launches second bank rescue plan to boost lending

LONDON — Britain threw its troubled banks another multi-billion-pound lifeline on Monday by allowing them to insure against steep losses and guaranteeing their debt to stop the credit crunch pushing the economy into a deep slump.

The multi-pronged plan aimed at getting banks lending again to credit-starved consumers will also raise the government's stake in Royal Bank of Scotland, of which it already owns 58 per cent.

Britain pumped £37-billion ($55-billion U.S.) into the banks in October but credit still remains scarce and figures this week are expected to confirm the economy is now in recession for the first time since 1992.

Under the latest British plan, lenders would have to identify their riskiest assets which they could then insure with the government for a fee. They would still be liable for initial losses but could at least put in a ceiling, boosting confidence.

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