European banks backed by €1 trillion in guarantees and cash

by Gill Montia

Story link: European banks backed by €1 trillion in guarantees and cash

European governments have shaped their responses to the global financial crisis and yesterday’s announcement by Prime Minister Gordon Brown that the UK Government would take stakes in Royal Bank of Scotland, HBOS and Lloyds TSB.

President Nicolas Sarkozy of France has announced that his government will provide €40 billion to recapitalise French banks and also back interbank lending with a €320 billion guarantee.

The architects of the French package are insisting that banks receiving support focus on providing affordable credit to homeowners and small businesses.

In Germany, €80 billion has been pledged to recapitalise banks in distress and €400 billion in loan guarantees.

The Bundesbank is providing a further €20 billion to cover potential losses from loans.

Across Europe over one trillion euros are now in place to support banks and unfreeze interbank lending.

Meanwhile, the US authorities are working on a scheme to inject $250 billion into the country’s banks, following a model similar to that adopted in the UK.

Full details have yet to be announced but it is understood that nine leading US banks could benefit from a collective $125 billion inflow of cash, in return for shares.