Government insures banks against toxic debt
The British government has agreed to insure UK banks against risky financial assets in a scheme that could cost the taxpayer up to £600 billion.
The Asset Protection Scheme is available for retail banks to protect themselves against massive losses on toxic assets.
British retail banks with over £25 billion in eligible assets have until 31 March to join the scheme.
The scheme will run for at least five years, with the aim of boosting bank lending.
Banks are currently unwilling to lend because they are unsure of the value of past investments. Government insurance will insure that all past investments are valuable – freeing up money for lending to new borrowers.
RBS and Lloyds Banking Group are both planning to place around £250 billion of toxic assets into the scheme.
Chancellor Alistair Darling said: “These are things like commercial loans or mortgages which are worth less now that perhaps they were a few months ago which we hope will increase in value as we get through this recession.
“The object of this is to provide that certainty and that confidence that will maintain lending and that’s essential for each and every one of us.”
Category: Companies News, Financials, Insurance News
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