Monday, January 19, 2009
The UK government's banking package
Posted by David Smith at 11:00 AM
Category: Thoughts and responses

Phase 2 of the official effort to ringfence bank losses and stimulate lending has been unveiled. It comes in three main parts, an asset protection scheme; a conversion of the RBS preference shares in ordinary shares, thereby increasing the government's stage in this lossmaking bank, outlined here; and official guarantees for new asset-backed securities.

There's plenty there. Whether it will work, or stave off the full nationalisation of the banks, remains to be seen. Two things will be seen as particularly positive for the housing market - a chance to get some wholesale funding going and the end of the policy of Northern Rock running down its mortgage book. With the approval of Brussels, it will start to become a net lender again.