On 8 October, Treasury announced a suite of measures it has discussed with BoE and FSA and will take to bolster the financial system. The proposals will:

  • provide short-term liquidity: BoE says it will extend and widen its facilities to do whatever is necessary to ensure stability of the financial system. It will make at least £200 billion available to banks under its Special Liquidity Scheme; 
  • make available new capital to UK banks and building societies: it plans to make available Tier 1 capital probably in the form of preference shares or PIBS. It will do this for UK incorporated banks with substantial UK operations, and building societies, and will consider applications from other UK incorporated banks; and 
  • ensure the banking system can maintain lending in the medium term: the Government plans to make available to eligible institutions a guarantee of new short- and medium-term debt issuance to help the industry in refinancing maturing, wholesale funding obligations. The guarantee will be subject to various conditions.

Already, Abbey, Barclays, HBOS, HSBC Bank plc, Lloyds TSB, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered have agreed they will increase their total Tier 1 capital by £25 billion by the end of the year. The Government is ready to provide more money if necessary. FSA and industry welcomed the measures.