Bank of America given £13.7bn bailout

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The Independent Online

The US investment banking giant Bank of America was today bailed out with another 20 billion dollars (£13.7bn) as governments around the world were forced into further rescue moves.

Bank of America, which employs about 8,000 staff in the UK, was granted the fresh round of State aid to help it absorb losses from the takeover this month of struggling rival Merrill Lynch.

And in Ireland, Anglo Irish Bank is to be nationalised by the Irish Government after a dramatic announcement last night, while the UK is reportedly thrashing out proposals for another round of bank rescue measures.



Today's handout will see Bank of America offered guarantees against losses on up to 118 billion dollars (£79.5bn) in troubled assets.

The US Government will take a stake in the bank in return for the aid, which comes on top of the 25 billion dollars (£16.8bn) handed to the group in last October's phase of bank bailouts.

It is understood ministers are planning an urgent bank package on these shores, which could pave the way for more taxpayer money to be pumped into the sector to offset losses on soaring bad debts.

The measures could also include a relaxation of the rules on balance sheet strength and Government guarantees for so-called toxic assets.

Bank shares have plummeted over the past week as confidence has again been been lost in the financial sector, with fears ahead of the forthcoming results season.

There are concerns that the sector is set to announce yet more hefty writedowns on bad debts that could wipe out the Government's £37 billion capital cash injection.

Royal Bank of Scotland, which is almost 60 per cent owned by the Government, has so far seen its shares plunge 25 per cent in the past week, while Barclays has lost 27 per cent.

HSBC, which is widely rumoured to be next in line to call on State aid, has sunk 13 per cent.

There are also worries that today's expiry of the ban on short-selling - imposed by the Financial Services Authority last September - could put further pressure on banking stocks.

News of the rescue moves comes after a torrid week for bank job losses.

Barclays announced 4,200 would go across retail, business and commercial banking operations.

Bank of America has also begun slashing UK jobs as it reportedly looks to trim its workforce by about 30 per cent under a global cost-cutting drive in the wake of its Merrill Lynch takeover.

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