Tweet
The European commission today rushed through approval of changes to Britain's £500bn rescue of its banking sector as the economic and financial crisis deepens.
But the government will have to wait until well into the new year to get a final settlement with the commission of its bail-out, and subsequent nationalisation, of Northern Rock.
The UK notified Brussels of proposed changes to its bank guarantee scheme for the sinking economy only last Thursday, more than two months after Gordon Brown and Alistair Darling hammered it out. These have now been approved along with three others, bringing the total changes endorsed by the commission to around 35 in the current crisis. Northern Rock has been put to one side as more urgent cases overwhelm the 50 commission staff dealing with bank rescues.
The UK scheme will, from 1 January, guarantee debt instruments issued in Japanese yen, Australian dollars, Canadian dollars and Swiss francs as well as sterling, US dollars and euros.
From now on banks taking part in the scheme will pay a fee on guaranteed liabilities based on an annual rate of 50 basis points plus 100% of the bank's median five-year credit default swap (CDS) spread during the period 2 July 2007 to 1 July 2008. It will be applied retrospectively from 13 October this year.
Banks taking part in the scheme will now be allowed to extend the initial term of the instruments guaranteed, currently set at three years, for a further two years – until April 2014. But this rollover applies to just one third of the overall guaranteed liabilities.
Neelie Kroes, EU competition commissioner, said: "The excellent cooperation with the UK authorities and streamlined procedures have once again led to a quick and effective commission decision.
"On this basis we have approved the amendment of the UK scheme in a period of fast-evolving financial markets in order to support banks to provide sufficient credit to the UK economy."
Separately, the commission approved a fresh German scheme to bail out industrial lender IKB with €5bn (£4.71bn) of guaranteed debt to "avoid a serious disturbance in the German economy and to ensure the continuity of IKB's business activities".
IKB prompted the European financial crisis in August last year and, rescued by the German state reconstruction bank KfW, is now owned by Texan private equity firm Lone Star.
The commission also approved new aid for German regional bank Nord LB and Latvia's support scheme for its solvent banks. It has yet to approve Finnish, Hungarian, Italian, Polish, Portuguese and Spanish schemes as well as a handful of individual bank rescues.
guardian.co.uk © Guardian News & Media Limited 2008 | Use of this content is subject to our Terms & Conditions | More Feeds
More...
