FTSE falls by 200pts despite Darling's desperate £250bn semi-nationalisation of Britain's banks

Darling announces £250billion rescue deal

FTSE tumbles 200 points on openingAsian markets tumble overnightRoyal Bank of Scotland shares plunge a massive 40%British savers frozen out by Icelandic internet bank

Shares slumped today after the Government announced a £250billion state rescue of Britain's crumbling High Street banks in the biggest nationalisation of modern times.

The FTSE-100 opened down more than 200 points shortly after Alistair Darling confirmed the drastic rescue plan that heralds a new era for the banking system.

He and Gordon Brown were forced to act amid fears that without the injection of taxpayers' money, household names in banking could vanish in days, if not hours.

The Treasury will buy stakes in the Royal Bank of Scotland, Barclays, Lloyds TSB and Halifax Bank of Scotland, it confirmed today.

This recapitalisation will cost £50billion. A further £200billion will be offered to banks in short-term loans in a bid to try and improve liquidity and kick start the market.

Mr Darling said this morning that the measures were 'absolutely critical' to helping Britain through these 'extraordinary times'.

'It is a process that inevitably will take time. It is not an instant change but it is a restructuring, it is stabilising the system, and that is very important,' he said.

The banks involved are: Abbey, Barclays, HBOS, HSBC, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered.

The bail-out will cost each taxpayer up to £2,000 but the Chancellor insisted their interest was being protected.

'I'm very clear that in return for all this, the taxpayer has got to see some upside. In relation to lending to small businesses, in relation to mortgages... that's important too,' he said.

The rescue plan was confirmed shortly before the markets opened. Investors were expecting yet another bloodbath over the day after Asian stocks tumbled overnight

Japan's Nikkei fell nearly 10 per cent at one stage, Hong Kong's Hang Seng was down 5.5 per cent. In Australia, the key index lost five per cent.

The slump followed a huge sell-off on Wall Street which saw the Dow Jones index close down more than 500 points.

Analysts were not optimistic the Government bail-out would ease the turmoil. CMC Markets dealer Matt Buckland: 'For the time being, it looks as if the impact is going to be minimal.

'As we've seen in the US, government intervention isn't freeing up credit markets and that is the key point - if it's difficult for companies and individuals to get hold of credit, it's going to be difficult to stimulate growth and break out of this recessionary mindset.'

Though the Chancellor and Prime Minister were desperate not to present the rescue as a crisis measure, it was clear that another day of panic and chaos on the stock market yesterday had left them with no other option.

The alternative was to allow the Royal Bank of Scotland - one of the world's ten largest banks with a £1,900billion balance sheet - to collapse, dragging down large sections of the economy with it. continues here

Related Posts by Categories