British govt with a rescue act!

The British government on Wednesday announced a 50 billion pounds emergency rescue plan to partly nationalise major banks, a day after the stock prices plunged raising investors fear about their survivability in the global financial meltdown.

Assuring that the move would help stabilise eight major British banks, the Prime Minister Gordon Brown billed it as a "radical" plan to restore public "confidence and trust" in the financial system.

Under the move unveiled half an hour before the markets opened today, the treasury said it would be investing upto 50 billion pounds in exchange for preference shares in eight of the country's largest banks and building societies: Abbey National PLC, Barclay's PLC, HSBC, HBOS, Lloyds TSB Bank, Royal Bank of Scotland, Nationwide building society and Standard and Chartered Bank.

Prime Minister Gordon Brown told newsmen at 10, Downing Street: "Extraordinary times call for the bold and far-reaching solutions."

"Our stability and restructuring programme is comprehensive, it is specific and it breaks new ground. This is not a time for conventional thinking or outdated dogma but for the fresh and innovative intervention that gets to the heart of the problem," he said.

Chancellor of Exchequer Alistair Darling said the scheme would see taxpayers' money used to buy stakes in major banks in an attempt to halt the meltdown in the financial sector.

And the Government said it stood ready to make at least another 25 billion pounds available for other eligible institutions.

The rescue plan came a day after the British banks stock prices plunged on investor fears that they wont be able to get through the global financial meltdown without help.

The Bank of England also announced that it will also make available 200-billion pounds in short term loans and issue 250-billion pounds to guarantee loans between banks.

In return for the public-backed cash injection, the Government is demanding that the banks must cap executive pay and shareholder dividends and commit to supporting lending to home-buyers and small businesses.

The Chancellor made it clear that the government was absolutely not seeking to take control of the banks.

"We are not going to run the banks. They will run as commercial operations, albeit with the government help in its restructuring," he said in a joint news conference with Brown.

Following the government intervention the market welcomed the treasury move and bank share prices began stabilising and recovering in early trading.

Emphasising that the taxpayer interests would be protected, an official 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.

The Prime Minister said the recovery plan would be funded through increased borrowing but insisted taxpayers would "earn a proper return".

The rescue plan marks a sharp turn in the fortunes of the British banks, which till now seemed immune to global financial crisis being faced by America's beleaguered financial institutions.

Just three weeks ago Barclays snapped up North American operations of Lehmann Brothers, the collapsed Wall Street giant.