The Prime Minister and the Chancellor have announced new measures to bring stability to the banking sector and ensure the resumption of lending to families and businesses across the UK.
Speaking at a Downing Street press conference, the PM said that a new asset protection scheme would allow the Government to provide insurance cover to banks looking to expand their lending. The Government will also negotiate binding “lending responsibility agreements” with banks with “precise and clear quantitative targets” around lending levels, he said.
Other steps to be taken include altering the mortgage strategy of Northern Rock and raising the Government stake in Royal Bank of Scotland in return for increased lending.
The PM said:
“These are comprehensive measures focused on one purpose - increasing the amount of lending that is available to families and to the businesses who are the backbone of our country and who want to invest and create jobs.
“Good businesses must have access to credit, jobs should not be lost needlessly…the cost of doing nothing is simply too great. These are extraodinary times, they require unprecedented action.”
Mr Brown said the package was the third part of the Government’s strategy following last year’s bail-outs that prevented the potential collapse of the banking system and the subsequent fiscal measures aimed at stimulating the economy. The purpose of the package was not to help banks themselves but to provide help for businesses and families and raise demand in the economy, he said.
The PM explained that the Government was introducing the new measures because while British banks had maintained their lending they were struggling to fill a gap in credit provision left by the retreat of foreign and non-bank lenders.
He also stressed the need to work in partnership with other nations facing the same problems and stave off a “damaging de-globalisation” of the world economy and a return to protectionism.
The measures will be complemented by a new £50 billion Bank of England scheme that will help boost lending by banks and other financial institutions through the purchase of high-quality bonds.
Read a transcript of the press conference
Read the Treasury press release on the Government’s financial intervention (new window)
Read the detailed Treasury press release on the Asset Protection Scheme (new window)
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