One of the objectives of this is to protect banks from the risks of “toxic credits”
London. (EFE). – The British Government left, for the second time in three months, to the rescue of the bank to stimulate the stagnant market of the credit and to avoid a greater deterioration of the economy.
Given the economic situation, the Government presented a new plan aimed at providing guarantees to banks so that they can once again grant loans to companies and families.
In the words of the British Minister of Economy, Alistair Darling, these are “essential” measures to save the economy, which is going through a recession, with losses of many jobs.
According to the consultancy “Ernst & Young”, the number of unemployed in the United Kingdom can exceed 3.2 million by the end of 2010 and reach 3.4 million in 2011.
The plan announced today aims to put in place a mechanism that will guarantee – through the payment of a fee (which can be done in cash or shares) and up to a certain level – the so-called “toxic” debts of banks to encourage them to resume the granting of credits to businesses and individuals.
The British Treasury wants to protect financial institutions from possible losses due to non-payment of their debtors, with which it is expected that the new measures will be sufficient to restore confidence in the sector.
With today’s plan, the Government extends the so-called Credit Guarantee Program, which ensures the debts of the banks that were recapitalized by the Administration at the end of 2008. This is the second program that the Labor Executive presents in just three months. .
The Treasury has analyzed several options since the first rescue plan, of 37,000 million pounds (about 40,330 million euros), released last October, failed to create the necessary conditions to resume a normal flow of loans.
In this way, the Government decided to present a second set of measures today after the sharp falls suffered last Friday by several banks in the stock market.
According to the Government, this plan has become necessary due to the deterioration of the global financial situation in the last two months and because the granting of loans to “businesses, homeowners and consumers is essential to support the economic recovery”.
“In the last two months in particular, the global financial situation and the economy have continued to deteriorate. In particular, at the international level, the willingness of banks to increase their loans has been limited by the uncertainty about the value of past investments, “the note said.
“Today’s measures aim to tackle the main source of uncertainty in the financial system and improve confidence, allowing lenders to increase their loans, which will translate into more effective support for the economy,” the note said.
In defending today’s program, British Prime Minister Gordon Brown said that these are measures with a single purpose, “to increase the amount of loans available to families and businesses that are the backbone of this country and that want invest and create jobs “.
The availability of credit in general is “inadequate” to support the growth of the economy, Brown said at a press conference to explain the rescue plan.
For the holder of Economy, “the banks in the whole world have been in serious difficulties and, sincerely, the governments have had to solve the problems”.
As he explained, the first bailout was necessary to avoid an immediate collapse of the British banking system, but today’s one responds to the problem of the lack of credit granting to companies.
“Loans, for various reasons, are not granted to businesses, to people who need mortgages, at the level we need to support the economy,” he added.
Part of this problem, he said, is that foreign banks have reduced their activity in the United Kingdom.
He also made it clear that the government does not intend to maintain its long-term participation in the banks, although it increased its share in the Royal Bank of Scotland (RBS).
Thus, the RBS reached an agreement with the Government for the exchange of 5,000 million pounds (about 5,450 million euros) in preferred shares per ordinary, which increases the state participation from 58 percent to 70 percent.
The RBS said that this exchange of shares will allow it to obtain liquidity and savings of 600 million pounds, all of which will stimulate the granting of new loans to its clients. Once the crisis is overcome, the Government will seek a way to withdraw its participation in banking institutions, as explained today by the Economy Minister.