Brown launches another bank rescue plan

Fresh package comes as RBS reveals £28bn loss and cuts up to 20,000 jobs

A fresh rescue package for the beleaguered bank system will be launched today with the promise of a £14bn boost to mortgage lending by state-controlled Northern Rock.

It will be followed by moves to get money flowing by insuring banks’ “toxic assets” and approving “quantitative easing” – in effect printing money – by the Bank of England.

But the scale of the problems facing the banking sector will be laid bare this week when RBS announces Britain’s biggest corporate loss of around £28bn, and says that it will cut up to 20,000 jobs and put assets worth billions of pounds up for sale.

Gordon Brown last night appealed for banks worldwide to resume their traditional role as “stewards” of the public’s money and pledged to join a global drive to overhaul the financial sector. Growing dismay in Whitehall over the failure to get more money moving through the economy is leading to further shock tactics this week by the Government.

Northern Rock, which was taken into state hands last year, will announce today it is increasing lending to homebuyers by up to £14bn over the next two years – an estimated £5bn this year and £9bn in 2010. Treasury sources said today’s move would represent a “significant return to the mortgage market” by Northern Rock.

Over the last year the bank has had to reduce its mortgage book and pay off some of its debts to the taxpayer. Meanwhile, a scheme to insure up to £400bn of banks’ toxic assets by transferring them to a single “bad bank”, thus encouraging troubled banks such as RBS and Lloyds to start lending again, is close to agreement.

Mr Brown was among eight European leaders meeting in Berlin who agreed sweeping changes to the international financial system, bringing hedge funds and other parts of the “shadow banking system” under international supervision. The Prime Minister will discuss the reform blueprint with President Barack Obama in talks at the White House, with the aim of reaching agreement at the G20 summit of advanced and developing nations in London in April. Mr Brown said yesterday: “We have got to show we can restructure the banking system around sound banking principles that deliver the … trust and the openness and transparency that is essential for people to once again trust the banks. The Berlin meeting, which brought together leaders from Germany, Britain, France, Italy, Spain, the Netherlands, Luxembourg and the Czech Republic, also called for $500bn (£347bn) to be made available to the International Monetary Fund to enable it to prevent fresh crises breaking.

Earlier, Mr Brown made a direct appeal to Britain’s high street lenders, urging them to return to “traditional” banking practices and “prudent” lending. Writing in The Observer, he said he had instructed the Financial Services Authority to curb the issuing of 100 per cent-plus mortgages which plunged many borrowers into trouble when the housing market crashed.

The RBS will unveil its dramatic restructuring on Thursday, with its new chief executive, Stephen Hester, dismantling the empire assembled by his predecessor Sir Fred Goodwin.

He will create a non-core subsidiary into which about £300bn of unwanted assets will be placed. The aim is to isolate the troubled areas of the business into a “bad bank” and allow the stock market to place a value on the remaining core operations.

Start your day with The Independent, sign up for daily news emails
Have you tried new the Independent Digital Edition apps?
ebooksAn introduction to the ground rules of British democracy
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs General

Recruitment Genius: Technical Support Specialist - Document Management

£30000 - £40000 per annum: Recruitment Genius: A leading provider of document ...

Recruitment Genius: Legal Secretary

£17000 - £17800 per annum: Recruitment Genius: This is an opportunity to work ...

Recruitment Genius: Ad Ops Manager - Up to £55K + great benefits

£45000 - £55000 per annum: Recruitment Genius: This company is a digital speci...

The Green Recruitment Company: Operations Manager - Anaerobic Digestion / Biogas

£40000 - £45000 Per Annum: The Green Recruitment Company: Job Title: Operation...

Day In a Page

Isis profits from destruction of antiquities by selling relics to dealers - and then blowing up the buildings they come from to conceal the evidence of looting

How Isis profits from destruction of antiquities

Robert Fisk on the terrorist group's manipulation of the market to increase the price of artefacts
Labour leadership: Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea

'If we lose touch we’ll end up with two decades of the Tories'

In an exclusive interview, Andy Burnham urges Jeremy Corbyn voters to think again in last-minute plea
Tunisia fears its Arab Spring could be reversed as the new regime becomes as intolerant of dissent as its predecessor

The Arab Spring reversed

Tunisian protesters fear that a new law will whitewash corrupt businessmen and officials, but they are finding that the new regime is becoming as intolerant of dissent as its predecessor
King Arthur: Legendary figure was real and lived most of his life in Strathclyde, academic claims

Academic claims King Arthur was real - and reveals where he lived

Dr Andrew Breeze says the legendary figure did exist – but was a general, not a king
Who is Oliver Bonas and how has he captured middle-class hearts?

Who is Oliver Bonas?

It's the first high-street store to pay its staff the living wage, and it saw out the recession in style
Earth has 'lost more than half its trees' since humans first started cutting them down

Axe-wielding Man fells half the world’s trees – leaving us just 422 each

However, the number of trees may be eight times higher than previously thought
60 years of Scalextric: Model cars are now stuffed with as much tech as real ones

60 years of Scalextric

Model cars are now stuffed with as much tech as real ones
Theme parks continue to draw in thrill-seekers despite the risks - so why are we so addicted?

Why are we addicted to theme parks?

Now that Banksy has unveiled his own dystopian version, Christopher Beanland considers the ups and downs of our endless quest for amusement
Tourism in Iran: The country will soon be opening up again after years of isolation

Iran is opening up again to tourists

After years of isolation, Iran is reopening its embassies abroad. Soon, there'll be the chance for the adventurous to holiday there
10 best PS4 games

10 best PS4 games

Can’t wait for the new round of blockbusters due out this autumn? We played through last year’s offering
Transfer window: Ten things we learnt

Ten things we learnt from the transfer window

Record-breaking spending shows FFP restraint no longer applies
Migrant crisis: UN official Philippe Douste-Blazy reveals the harrowing sights he encountered among refugees arriving on Lampedusa

‘Can we really just turn away?’

Dead bodies, men drowning, women miscarrying – a senior UN figure on the horrors he has witnessed among migrants arriving on Lampedusa, and urges politicians not to underestimate our caring nature
Nine of Syria and Iraq's 10 world heritage sites are in danger as Isis ravages centuries of history

Nine of Syria and Iraq's 10 world heritage sites are in danger...

... and not just because of Isis vandalism
Girl on a Plane: An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack

Girl on a Plane

An exclusive extract of the novelisation inspired by the 1970 Palestinian fighters hijack
Why Frederick Forsyth's spying days could spell disaster for today's journalists

Why Frederick Forsyth's spying days could spell disaster for today's journalists

The author of 'The Day of the Jackal' has revealed he spied for MI6 while a foreign correspondent