Public rescue plan for UK banks

The British government announced plans on Wednesday to partially nationalize major banks, with taxpayers taking a share stake in a bid to restore stability. The Treasury made the announcement a half hour before markets opened, saying eight banks signed up for the so-called ‘recapitalization’ plan, which offers up to 50 billion pounds (87.5 billion US dollars) in the form of preference shares.

The Treasury said the banks are Abbey National PLC, Barclays PLC, HBOS PLC, HSBC Bank PLC, Lloyds TSB Bank PLC, Nationwide Building Society, Royal Bank of Scotland and Standard Chartered Bank. Chancellor of the Exchequer Alistair Darling said the government was responding to extraordinary times. "These are extraordinary times. You just have to look at what's happening in markets all over the world at the moment. We really are going through so turbulent times," Darling told Sky News.

The Treasury said the Bank of England would expand its Special Liquidity Scheme to facilitate short-term borrowing and help to free up credit markets. At least 200 (b) billion pounds (350 (b) billion US dollars) will be loaned for up to three months, and it will also offer US dollar loans for one week. News of the government's plans leaked out on Tuesday morning, triggering a sharp sell-off in bank shares.

Separately, UK is also taking legal action against Iceland. British Prime Minister Gordon Brown says Britain will take legal action against Icelandic authorities to recover money held by British savers in U.K. branches of troubled Icelandic banks. Brown told a news conference Wednesday that the government would stand behind the deposits of the British customers. Brown said: "We are showing by our action that we stand by people who save.'' Iceland has nationalized two of its major banks, including Landsbanki, the nation's second largest bank. British savers reportedly had deposited millions in accounts through Landsbanki's Internet operation, Icesave, which has suspended withdrawals.