labels: World economy
US bailout package may cover 5 UK banks also news
26 September 2008

Mumbai: The US government's proposed $700-billion bailout package will cover five leading UK banks, which together own around $175 billion (95.3 billion pounds) of distressed assets, newspaper reports said.

Of the affected UK banks, HSBC holds about $82.6 billion (45 billion pounds) in illiquid assets,  Barclays has $32 billion (17.4 billion pounds), Royal Bank of Scotland $30 billion (16.2 billion pounds), HBOS 13.3 billion pounds and Lloyds TSB, which agreed to buy HBOS for $24.42 (12.2 billion pounds) last week, has distressed assets of about 6.24 billion (3.4 billion pounds).

A quarter of the bailout package would then go to the British banks if they opt to fully tap into the rescue plan.

In case of a rescue package, the five UK banks, which have significant operations in America, would be allowed to transfer the securities held by them to a federally-backed treasury, the report said.

UK's central bank, the Bank of England, is also pumping an additional 55 billion pound amidst the worsening credit market pressure as hopes for a US bail-out faded, reports said.

The cash infusion helped push down the three-month benchmark Libor interbank lending from yesterday's 6.2762 per cent to near the base rate of 5 per cent, reports said. Three month dollar Libor rose by nearly 30 basis points to 3.76 per cent.

BoE said it also intends to offset the additional reserves taken up in the long-term repo operations in its other operations, if necessary by draining reserves.

Dutch-Belgian bank Fortis, meanwhile, denied it has any liquidity problem although it planned to sell more non-core activities than earlier planned.


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US bailout package may cover 5 UK banks also