The three-pronged plan, which may end up seeing the British state invest as much as £50bn in the country's banks, is the latest in a series of increasingly far-reaching measures by governments in the US and Europe to end the year-long global credit crisis. Gordon Brown, UK prime minister, yesterday described the scheme as a “far more comprehensive programme than people had expected” though he acknowledged there had been “a failure of responsibility on the part of the banking system”.
News of the scheme failed to calm the stock markets. Amid massive share trading volumes the FTSE 100 index of leading shares closed at 4,367, down more than 5 per cent, marking its worst three-day run since October 1987. However, the cost of insuring the debt of Britain's banks against default dropped, suggesting credit markets had been reassured by the scheme.
The British plan, rushed out yesterday morning after officials worked through the night to finalise it, will see the government insure as much as £250bn of new debt issued by banks in an effort to ensure financial institutions can renew their bonds as they mature.