Brown to unveil second bank bailout package

Prime Minister Gordon Brown said he would announce Monday measures to "get lending moving" in the economy, in a fresh bid to revitalise the banking system.

It marks a second bailout of banks, following the 37-billion-pound recapitalisation scheme in October, which has largely failed to restore confidence in the banking sector.

The announcement came after Brown told banks on Saturday that they must own up to the extent of their bad assets.

"We have recapitalised the banks, we have injected money into the economy, at the same time we know that the essential problem that has been holding back banks internationally is the resumption of lending," Brown told journalists in the Egyptian resort of Sharm el-Sheikh on Sunday.

"That's what we're going to be doing tomorrow and that is what the package is about," he said on the sidelines of a summit on the Gaza conflict.

"My first priority is hardworking families worried about whether they can get a mortgage, businesses who work hard every day. They need the banks to do the job they say they're there for.

"What we want to do now is to get the resumption of lending and you will see tomorrow there are measures taken that will ensure that banks and non-bank institutions are able to resume lending or expand lending and in some cases to start lending.

"What we want to do is see businesses get the money that they need to be able to create jobs and secure investment for the future. What I want to see is people who are mortgage holders having access to mortgages at prices they can afford."

The BBC reported that the package of measures would include an insurance scheme for banks with bad loans.

The plan would see banks paying a fee to have a certain degree of their bad loans underwritten by the Treasury, the corporation said.

The Treasury said it was looking at "a range of options", with one of the ideas "in the mix" being a taxpayer-backed insurance scheme paying out to the banks if the value of their so-called "toxic assets" fell below a certain level.

Officials were also thought to be considering guarantees for inter-bank loans.

The Sunday Times newspaper said that among the measures, up to 100 billion pounds of new lending could be guaranteed.

The weekly broadsheet said the taxpayer's stake in banks like HBOS and Royal Bank of Scotland could rise further.

Brown said Saturday that British banks' exposure to international losses was the largest problem they faced and called for an internationally-agreed solution.

"The international community has got to modernise and change and reform and get to the roots of the problem that make us angry about the way that the system is operating," he told reporters in London.

His comments came after shares in Royal Bank of Scotland and Barclays plunged Friday after US giant Citigroup announced an 8.29 billion dollar fourth quarter loss and Bank of America got a 20 billion dollar state bailout.

And recession is likely to become official in Britain this week when data is expected to show that the economy contracted for a second straight quarter in the final three months of 2008.