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Banks bailed out again

Jan 19 2009

The government is set to plough £200 billion into Britain's banks in return for legally-binding contracts to increase lending to businesses.

Gordon Brown is expected to reveal the latest bailout deal today, whereby the government will underwrite £200 billion worth of bad debts and risky loans.

Chancellor Alistair Darling says this deal will differ from previous ones as the banks will have to sign contracts to increase lending, with RBS having already pledged £6 billion to businesses and homeowners.

He adds: 'What we've said in return is "you've got to lend about £6 billion more to businesses and to people" and the RBS Group have agreed to that.'

In addition, RBS has arranged a deal which will increase the government's share in the bank from 58 per cent to 70 per cent.

The arrangement will see the bank swap £5 billion of preference shares the government currently holds for ordinary shares.

RBS today revealed losses of £45 billion for 2008, accounting for £8 billion of losses on lending and £37 billion it will have to write off in the value of other banks it bought.

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