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Brown: Bold action required

08/10/2008

Gordon Brown and Alistair Darling have put forward their plans to fix the credit markets seeing the taxpayer becoming shareholders of the major banks.

After a day of massive share price falls for the banks on speculation of a bail out plan, the prime minister and the chancellor have outlined their plans to shore up the banking system.

Under the plans, the government is offering to take share of banks – providing them with capital – as well guaranteeing inter-bank loans up to £250 billion and offering £200 billion in liquidity through the bank of England.

The government will not be taking a seat on any bank's board.

"Families are small are worried and I know and understand this," Mr Brown said

"Good strong banks are essential… these times require bold action."

He added the global financial market had ceased to function and the plans "break new ground".

The prime minister said the plans would bring about a "comprehensive restructuring" of banking and went further than the US bail out.

He also pledged the taxpayer will not lose out from the deal.

"All investments will earn a proper return for taxpayer," he said. "On commercial terms we expected to be rewarded."

He added strings would be attached for the banks, with caps on executive remuneration schemes, control on dividend payments, and credit lines to small business will be maintained.

He described them as "tough conditions".

Mr Darling said: "Restructuring of banking is necessary. We are not looking to take control of the banks."