Britain unveils $875 billion bank rescue amid market panic

Britain rushed out a package worth up to 875 billion dollars Wednesday to head off a banking collapse as markets went into freefall over fears the worst financial crisis in decades has still not hit a peak.

Panic selling set hit key European and Asian stock exchanges and a drop of nearly 10 percent in Tokyo prompted Japanese Prime Minister Taro Aso to voice "huge fears" for the future of the world's second biggest economy.

Central bank moves to increase the amount of available credit did little to calm the frenzy.

Unveiling a package which will see Britain's eight main banks part-nationalised, Prime Minister Gordon Brown said "extraordinary times call for... bold and far-reaching solutions."

The government said it would use 50 billion pounds (64 billion euros, 87 billion dollars) to buy major stakes in HSBC, Royal Bank of Scotland, Barclays, HBOS, Lloyds TSB, Standard Chartered, Abbey and Nationwide Building Society.

It would also make available 200 billion pounds in short-term loans and issue 250 billion pounds to guarantee loans between banks.

The government hopes the measures will overcome bank reluctance to lend to each other -- the root of the financial crisis.

Brown called for "European-wide funding plan" to help ease the global financial crisis and said proposals had been made to other nations.

Britain's rescue initiative followed desperate efforts by other governments and institutions.

The European Central Bank said it would pump 70 billion dollars (95 billion euros) into interbank money markets in one-day loans Wednesday, raising the daily amount by 20 billion dollars.


Sorce: EconomicTimes