Shares on the London Stock Exchange, the world's third-largest stock exchange, plummeted today after the Great Crash of 2008 is about to send Britain, Europe's second-biggest economy, into its first recession since the early 1990s.
Shares in the Royal Bank of Scotland (RBS) tumbled 40% in at one stage in early trading today.
A report by the BBC's Business Editor Robert Peston revealed banks had held a secret meeting with the Chancellor, Alistair Darling, to discuss a £50 billion bail-out plan.
Bank shares plunge up to 40% in an hour after news of £50bn banks deal was leaked to BBC
By Nicola Boden
07th October 2008
Daily Mail
Ahead of the curve: BBC Business Editor Robert Peston revealed banks had held a secret meeting with Alistair Darling to discuss a rescue plan
British banking shares plunged today after it was claimed finance chiefs had asked the Chancellor for a £50billion bail-out to stave off further turmoil.
The report by BBC business editor Robert Peston unleashed a fresh day of chaos on the London Stock Market, with shares in Royal Bank of Scotland tumbling by 40 per cent at one stage in early trading.
Its value plummeted by a massive £10billion on top of the 20 per cent fall yesterday despite the bank's denial that it had asked the Government for capital at a secret meeting last night.
In a further blow, the ratings agency Standard & Poor downgraded the bank meaning they now regard it a less safe institution to lend to.
Lloyds TSB also saw its value drop up to 26 per cent. HBOS fell by 23 per cent and Barclays by 17 per cent as investors panicked at the prospect of household names being part-nationalised and launched a mass sell-off.
After its biggest ever one-day drop in history, the Stock Exchange initially rallied by almost three per cent on the back of a late surge on Wall Street and a huge rates cut in Australia but the turmoil around the banking sector soon dragged it back into the red.
Throughout the morning, it swung between positive and negative territory in an echo of the mixed fortunes of markets in Asia and Australia overnight.
Wall Street opened up slightly this afternoon, rising 0.5 per cent on opening after the U.S. Federal Reserve moved to free up the commercial paper market used by companies to fund their day-to-day business.
Meanwhile, some 300,000 British savers with Icelandic internet bank Icesave were blocked from accessing their money after its parent company Landsbanki went into receivership.
Investor fears in the UK were also fuelled by a warning from business leaders that Britain was already in a recession and more than 500 people will lose their jobs every single day over the next 18 months as a result.
Peston claimed Alistair Darling secretly met with banking executives, as well as Bank of England Governor Mervyn King and chairman of the Financial Services Association Adair Turner, last night to discuss the crisis.
The top three banks, RBS, HBOS and Lloyds TSB were apparently disappointed Mr Darling still did not have a detailed rescue strategy and warned him he could not afford to dither.
They demanded he speed up plans for recapitalisation, which would see the Government inject cash in return for equity stakes in the business, according to the BBC.
Peston said: 'One banker told me that what he called the Gang of Three of Barclays, RBS and Lloyds TSB told Darling to pull his finger out and finalise whatever it is he's eventually prepared to offer on taxpayers' behalf.'
Although the three giants do not desperately need more funding, their shares have been battered and they want help to boost their balance sheets in a bid to restore confidence among investors.
Under pressure: Banking chiefs have warned Alistair Darling he cannot afford to dither
Peston, writing on his blog, claimed they do not want a formal guarantee for wholesale deposits - the money lent by other financial institutions - as in Ireland, but a formal pledge that the Government would cover any funding gap if necessary.
The three chief executives were due to meet again today to discuss their strategy ahead of more negotiations with the Treasury. Both RBS and Barclays categorically denied asking for capital.
'Contrary to press speculation, RBS did not make a request to Government for capital,' an RBS spokesman said.
Downing Street refused to be drawn on the reports. Gordon Brown's spokesman said the Government was 'looking at every aspect' but that it would be 'irresponsible' to speculate about the details of any future plans.
'As and when the Treasury are in a position to say more they will say more, but we are not going to speculate prematurely,' he insisted.
The Cabinet met at Number 10 this morning where Mr Brown assured once again he would 'take whatever action is necessary' to maintain stability.
Foreign Secretary David Milliband said as he left: 'These are very serious times. We take them very seriously.'
Mr Darling has insisted he will not be stampeded into rushing out an economic rescue and is understood to consider recapitalisation a last resort.
He made clear in his emergency statement to the Commons yesterday that he favoured helping banks individually rather than as a whole.
However, he and Gordon Brown - who has effectively gambled his political future on being able to turn the economy round - are facing growing attack for failing to act.
Vince Cable, the Liberal Democrat treasury spokesman, said today: 'The Government must come clean on its plans very quickly, otherwise continued uncertainty will force more banks to the wall.
'We're effectively talking about part-nationalisation, and there is no point in trying to conceal that. It is much more sensible to deal with this proactively, rather than through a succession of collapses like those of Bradford & Bingley or Northern Rock.'
Pandemonium: Traders on Wall Street react with horror as the Dow Jones index plunged a record 800 points during trading yesterday
Shadow Chancellor George Osborne said yesterday: 'For all the risks to taxpayers involved, there is one thing worse than Government action. And that is inaction in the face of this crisis.'
Mr Darling met other EU finance chiefs in Luxembourg this morning before returning to London but they made no progress on deciding how to tackle the corporate crisis.
All member states would not even agree on a EU-wide savings guarantee of 100,000 Euros.
They eventually settled on half that figure, which is well below the figure already guaranteed in Britain.
After Germany sparked pandemonium by announcing a 100 per cent guarantee of savings on Sunday, all the countries did agree to work more closely together to try and restore market confidence but the promise alone is unlikely to bring much comfort.
Jim McConalogue, from the European Foundation think tank, said: 'The Paris summit on Saturday failed to do anything for Britain. The Luxembourg meeting today has failed to achieve anything of real substance.
'This proves one thing: Europe is without substance and can do nothing but disintegrate in the face of real global economic challenges. Again, Alistair Darling will return home empty-handed to a country in financial tatters.'
Mr Darling is under massive personal pressure to deliver after his emergency speech to the Commons yesterday failed spectacularly to restore any confidence. As he defended the Government's strategy, the FTSE-100 recording its biggest ever fall.
During his speech alone, which lasted just 13 minutes, analysts estimated some £25billion was wiped off shares. Shares in every single company on the blue chip index plunged, with the worst hit losing a quarter of their value.
The picture was equally bleak around the world, with markets ignoring similar reassurance from EU leaders and George Bush. The U.S. Dow Jones rallied after a record 800-point fall but still closed below 10,000 for the first time since 2004.
On another day of financial turmoil around the world today:
Retreat: German Chancellor Angela Merkel with Italy's Silvio Berlusconi. Germany was forced to row back on its shock promise to guarantee savings
Business lobby groups, the British Chamber of Commerce and the CBI, have now joined demands for an interest rate cut later this week.
The BCC warned Britain was already in a recession and 550 people would lost their jobs every single day for the next 18 months. It said the results of its latest survey of business were the worst since records began in 1989.
On every measure it examined - including profitability, turnover, redundancies and recruitment - the figures were 'exceptionally bad'. Many bosses are trying to save money by not replacing people who leave, retire or die.
BCC chief economic adviser David Kern said Britain was facing 'a potential emergency': 'The results support the view that a UK recession has started and the downturn is getting worse.'
The two groups urged the Government to cut business taxes and slash interest rates, risk making a dire situation even worse.
The CBI had originally been calling for a half-point cut in November, but ripped up the timetable as the crisis worsened.
Entrepreneur Sir Richard Branson also called for a rates cut today, as well as urging the Government to consider guaranteeing all savings.
He said: 'I think a lot needs to be done. I think the Government needs to consider guaranteeing all the bank deposits, even if it is just on a temporary basis - maybe for a year or two - so that we don't have money flooding out of the UK to Ireland and other countries where bank deposits are guaranteed.
'And I think there should be a very big interest rate drop this Thursday, as much as one per cent.'
Official figures from the Office for National Statistics later this month are expected to confirm the beginning of a recession, defined as two consecutive quarters of negative GDP growth.
If the Bank of England Monetary Policy Committee answers the calls for a halfpoint cut it would be the biggest reduction since the aftermath of the 9/11 attacks in 2001 and would knock £62 a month off repayments on an average mortgage of £150,000.
But experts warn that some borrowers will lose out as cash- strapped banks and building societies fail to pass on all the benefits.
dailymail.co.uk
Shares in the Royal Bank of Scotland (RBS) tumbled 40% in at one stage in early trading today.
A report by the BBC's Business Editor Robert Peston revealed banks had held a secret meeting with the Chancellor, Alistair Darling, to discuss a £50 billion bail-out plan.
Bank shares plunge up to 40% in an hour after news of £50bn banks deal was leaked to BBC
By Nicola Boden
07th October 2008
Daily Mail
- Banks 'ask Darling for £50billion cash injection'
- Royal Bank of Scotland shares plunge a massive 40%
- FTSE rally wiped out as it tumbles back into the red
- British savers frozen out by Icelandic internet bank
- EU summit fails to decide way out of corporate crisis
Ahead of the curve: BBC Business Editor Robert Peston revealed banks had held a secret meeting with Alistair Darling to discuss a rescue plan
British banking shares plunged today after it was claimed finance chiefs had asked the Chancellor for a £50billion bail-out to stave off further turmoil.
The report by BBC business editor Robert Peston unleashed a fresh day of chaos on the London Stock Market, with shares in Royal Bank of Scotland tumbling by 40 per cent at one stage in early trading.
Its value plummeted by a massive £10billion on top of the 20 per cent fall yesterday despite the bank's denial that it had asked the Government for capital at a secret meeting last night.
In a further blow, the ratings agency Standard & Poor downgraded the bank meaning they now regard it a less safe institution to lend to.
Lloyds TSB also saw its value drop up to 26 per cent. HBOS fell by 23 per cent and Barclays by 17 per cent as investors panicked at the prospect of household names being part-nationalised and launched a mass sell-off.
After its biggest ever one-day drop in history, the Stock Exchange initially rallied by almost three per cent on the back of a late surge on Wall Street and a huge rates cut in Australia but the turmoil around the banking sector soon dragged it back into the red.
Throughout the morning, it swung between positive and negative territory in an echo of the mixed fortunes of markets in Asia and Australia overnight.
Wall Street opened up slightly this afternoon, rising 0.5 per cent on opening after the U.S. Federal Reserve moved to free up the commercial paper market used by companies to fund their day-to-day business.
Meanwhile, some 300,000 British savers with Icelandic internet bank Icesave were blocked from accessing their money after its parent company Landsbanki went into receivership.
Investor fears in the UK were also fuelled by a warning from business leaders that Britain was already in a recession and more than 500 people will lose their jobs every single day over the next 18 months as a result.
Peston claimed Alistair Darling secretly met with banking executives, as well as Bank of England Governor Mervyn King and chairman of the Financial Services Association Adair Turner, last night to discuss the crisis.
The top three banks, RBS, HBOS and Lloyds TSB were apparently disappointed Mr Darling still did not have a detailed rescue strategy and warned him he could not afford to dither.
They demanded he speed up plans for recapitalisation, which would see the Government inject cash in return for equity stakes in the business, according to the BBC.
Peston said: 'One banker told me that what he called the Gang of Three of Barclays, RBS and Lloyds TSB told Darling to pull his finger out and finalise whatever it is he's eventually prepared to offer on taxpayers' behalf.'
Although the three giants do not desperately need more funding, their shares have been battered and they want help to boost their balance sheets in a bid to restore confidence among investors.
Under pressure: Banking chiefs have warned Alistair Darling he cannot afford to dither
Peston, writing on his blog, claimed they do not want a formal guarantee for wholesale deposits - the money lent by other financial institutions - as in Ireland, but a formal pledge that the Government would cover any funding gap if necessary.
The three chief executives were due to meet again today to discuss their strategy ahead of more negotiations with the Treasury. Both RBS and Barclays categorically denied asking for capital.
'Contrary to press speculation, RBS did not make a request to Government for capital,' an RBS spokesman said.
Downing Street refused to be drawn on the reports. Gordon Brown's spokesman said the Government was 'looking at every aspect' but that it would be 'irresponsible' to speculate about the details of any future plans.
'As and when the Treasury are in a position to say more they will say more, but we are not going to speculate prematurely,' he insisted.
The Cabinet met at Number 10 this morning where Mr Brown assured once again he would 'take whatever action is necessary' to maintain stability.
Foreign Secretary David Milliband said as he left: 'These are very serious times. We take them very seriously.'
Mr Darling has insisted he will not be stampeded into rushing out an economic rescue and is understood to consider recapitalisation a last resort.
He made clear in his emergency statement to the Commons yesterday that he favoured helping banks individually rather than as a whole.
However, he and Gordon Brown - who has effectively gambled his political future on being able to turn the economy round - are facing growing attack for failing to act.
Vince Cable, the Liberal Democrat treasury spokesman, said today: 'The Government must come clean on its plans very quickly, otherwise continued uncertainty will force more banks to the wall.
'We're effectively talking about part-nationalisation, and there is no point in trying to conceal that. It is much more sensible to deal with this proactively, rather than through a succession of collapses like those of Bradford & Bingley or Northern Rock.'
Pandemonium: Traders on Wall Street react with horror as the Dow Jones index plunged a record 800 points during trading yesterday
Shadow Chancellor George Osborne said yesterday: 'For all the risks to taxpayers involved, there is one thing worse than Government action. And that is inaction in the face of this crisis.'
Mr Darling met other EU finance chiefs in Luxembourg this morning before returning to London but they made no progress on deciding how to tackle the corporate crisis.
All member states would not even agree on a EU-wide savings guarantee of 100,000 Euros.
They eventually settled on half that figure, which is well below the figure already guaranteed in Britain.
After Germany sparked pandemonium by announcing a 100 per cent guarantee of savings on Sunday, all the countries did agree to work more closely together to try and restore market confidence but the promise alone is unlikely to bring much comfort.
Jim McConalogue, from the European Foundation think tank, said: 'The Paris summit on Saturday failed to do anything for Britain. The Luxembourg meeting today has failed to achieve anything of real substance.
'This proves one thing: Europe is without substance and can do nothing but disintegrate in the face of real global economic challenges. Again, Alistair Darling will return home empty-handed to a country in financial tatters.'
Mr Darling is under massive personal pressure to deliver after his emergency speech to the Commons yesterday failed spectacularly to restore any confidence. As he defended the Government's strategy, the FTSE-100 recording its biggest ever fall.
During his speech alone, which lasted just 13 minutes, analysts estimated some £25billion was wiped off shares. Shares in every single company on the blue chip index plunged, with the worst hit losing a quarter of their value.
The picture was equally bleak around the world, with markets ignoring similar reassurance from EU leaders and George Bush. The U.S. Dow Jones rallied after a record 800-point fall but still closed below 10,000 for the first time since 2004.
On another day of financial turmoil around the world today:
- Iceland's second largest bank, Landsbanki, owner of UK internet bank Icesave. went into receivership shortly after it was taken over by the government
- Australia slashed interest rates by 1 per cent, its biggest cut since 1992, after stocks opened 3.7 per cent down. They then rallied to close up 1.7 per cent
- Japan's Nikkei plunged five per cent at one stage before rallying to close down three per cent at 10,155.90 - still its lowest level for almost five years
- Russia kept is two main stock exchanges closed until 1pm local time after heavy losses on 'Meltdown Monday'.
Retreat: German Chancellor Angela Merkel with Italy's Silvio Berlusconi. Germany was forced to row back on its shock promise to guarantee savings
Business lobby groups, the British Chamber of Commerce and the CBI, have now joined demands for an interest rate cut later this week.
The BCC warned Britain was already in a recession and 550 people would lost their jobs every single day for the next 18 months. It said the results of its latest survey of business were the worst since records began in 1989.
On every measure it examined - including profitability, turnover, redundancies and recruitment - the figures were 'exceptionally bad'. Many bosses are trying to save money by not replacing people who leave, retire or die.
BCC chief economic adviser David Kern said Britain was facing 'a potential emergency': 'The results support the view that a UK recession has started and the downturn is getting worse.'
The two groups urged the Government to cut business taxes and slash interest rates, risk making a dire situation even worse.
The CBI had originally been calling for a half-point cut in November, but ripped up the timetable as the crisis worsened.
Entrepreneur Sir Richard Branson also called for a rates cut today, as well as urging the Government to consider guaranteeing all savings.
He said: 'I think a lot needs to be done. I think the Government needs to consider guaranteeing all the bank deposits, even if it is just on a temporary basis - maybe for a year or two - so that we don't have money flooding out of the UK to Ireland and other countries where bank deposits are guaranteed.
'And I think there should be a very big interest rate drop this Thursday, as much as one per cent.'
Official figures from the Office for National Statistics later this month are expected to confirm the beginning of a recession, defined as two consecutive quarters of negative GDP growth.
If the Bank of England Monetary Policy Committee answers the calls for a halfpoint cut it would be the biggest reduction since the aftermath of the 9/11 attacks in 2001 and would knock £62 a month off repayments on an average mortgage of £150,000.
But experts warn that some borrowers will lose out as cash- strapped banks and building societies fail to pass on all the benefits.
dailymail.co.uk