As predicted in The Scotsman today, Chancellor Alistair Darling has announced a £50 billion emergency rescue plan for the troubled UK banking sector.
The scheme will see taxpayers' money used to buy stakes in major banks in an attempt to halt the meltdown in the financial sector.
The bail-out comes after another day of panic on the stock market, with banks suffering devastating share losses amid concerns over their funding.
Shares in the Edinburgh-based
Royal Bank of Scotland plummeted by almost 40%.
This morning the bank
denied rumours that chief executive Sir Fred Goodwin and chairman Sir Tom McKillop were to stand down.
Mr Darling said that the measures the Government was taking were in response to "extraordinary times".
"Those are absolutely critical so far as the system is concerned and we want to make sure that we can get the system going again," he told Sky News.
"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."
Scotland's other banking institution,
HBOS, which is in the process of being taken over by Lloyds TSB, said it welcomed today's announcement.
"The Government's announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system.
"HBOS believes that this initiative is very much in the interests of its shareholders and customers."
The Chancellor said the taxpayer would not lose out.
"The taxpayers' interest is being protected," he said.
"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."
Scotland's First Minister Alex Salmond said he also welcomed the Government's package as
a "very substantial" set of measures.
Mr Darling said he still did not "rule anything out" but, of today's package, he said: "I believe it will go a long way."
He admitted he had been "irritated" by speculation about the package since Sunday because the Government was working on the package.
"I wanted to announce it when the time was right, when we had got everything sorted out, we had a scheme that worked and the big banks were signed up to it," he said.
"And we actually finished these discussions only a few hours ago."
Mr Darling said it was "absolutely not" true that the chairman and chief executive of Royal Bank of Scotland would lose their jobs as part of a deal with the Government.
"It's not the Government's business to deal with banks' appointments," he said. "It is entirely a matter for banks."
Eight UK banks and building societies – including RBS, Barclays, HBOS, Lloyds TSB and Nationwide – have signed up to an initial £25 billion scheme.
And the Government said it stood ready to make at least another £25 billion available for other eligible institutions.
The Bank of England is also extending the existing £50 billion Special Liquidity Scheme to £200 billion, while a further £250 billion being pumped in under a debt guarantee scheme.
It is hoped that the extraordinary measures will provide the capital boost needed and help restore confidence to get banks lending to each other again.
But the Government is demanding that in return for the public-backed cash injection, banks must cap executive pay and shareholder dividends and commit to supporting lending to homebuyers and small businesses.
Details of the stake-buying scheme reveal that taxpayers will buy preference shares in the banks, which means that they will be first in line for the pay-out of dividends.
The Government sought to give assurances that taxpayer interests would be protected.
A statement said: "If the Government is to provide the capital, the issue will carry terms and conditions that appropriately reflect the financial commitment being made by the taxpayer.
"In reaching agreement on capital investment, the Government will need to take into account dividend policies and executive compensation practices and will require a full commitment to support lending to small businesses and home buyers."
Reports also suggested that RBS had agreed a boardroom clear-out in return for the state-assisted boost.
It is understood that the bank's chief executive Sir Fred Goodwin and chairman Sir Tom McKillop had agreed to stand down.
Mr Darling said he would be announcing measures in the Commons later to help British depositors in
Icesave – the internet arm of the Icelandic Landsbanki bank which was nationalised yesterday by the Icelandic government.
He told GMTV: "I am very aware of the fact that Iceland has, sadly, chosen to default on its obligations here. We are pursuing Iceland and we will pursue it vigorously to make sure that we get the money due to us back.
"But in the meantime I am going to be able to help those savers who would otherwise have to look to Iceland to get their money back. I am prepared to stand behind them and to stand behind the depositors.
"It demonstrates my commitment to help people who have put money into banks in these exceptional circumstances."
Shadow chancellor George Osborne said the Tories would be "as constructive as possible".
"We want this to work, we hope it will work," he told BBC Radio 4's Today programme.
"This is the final chapter of the age of irresponsibility and it's absolutely extraordinary that a government has been driven by events to today's announcement."
Mr Osborne said it was the "right thing" to provide for the recapitalisation of the banks and some guarantees of the inter-bank market.
But he added: "I want to make sure – and I hope that in detailed negotiations with the individual banks the Chancellor makes sure – that this money is used to allow credit to flow through the economy again, to get that loan extended to the small businesses who need it, to get the family mortgage extended, it is not used to pay bonuses for bankers.
"I think people would be shocked if bonuses were being paid to the banks that take this money."
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The full article contains 1078 words and appears in The Scotsman newspaper.
