Governments around the world are announcing rescue plans to support banks and unfreeze credit markets.
Over $5 trillion has been committed to bailing out the financial sector, while regulatory reforms loom and signs of a worldwide recession mount..
Below are details of plans announced by governments (in alphabetical order):
G7 COUNTRIES:
FRANCE – 360 billion euros ($462.8 billion)
– BANK CAPITAL: Up to 40 billion euros available to help recapitalise banks. State to lend 10.5 billion euros to France's top six banks by year-end. Banks to pay interest rate of more than 400 basis points over risk-free rate. Government has said it may take direct stakes if the banks in question do not begin lending to companies.
– GUARANTEE INTERBANK BORROWING: Up to 320 billion euros to be made available to guarantee bank lending. The fund will guarantee bank paper issued before Dec 31, 2009, and lasting up to five years.
– BANK DEPOSITS: Guaranteed up to 70,000 euros.
GERMANY – 515 billion euro ($664.1 billion)s
– BANK CAPITAL: A maximum of 80 billion euros is available for recapitalisations, while 20 billion is set aside as a provision for the guarantee offer. Each bank in the scheme will be allowed recapitalisation of up to 10 billion euros, and the fund will assume risk of up to 5 billion euros per bank.
Commerzbank became the first to apply for state funds, taking 8.2 billion euros.
– LENDING PROGRAMME: A new 15 billion euro programme will be introduced at state-owned KfW to strengthen its lending until end-2009. KfW to increase funds available to take stakes in young, innovative firms as part of stimulus package.
– GUARANTEE INTERBANK BORROWING: The government will provide 400 billion in guarantees which will run until Dec. 31, 2009.
– BANK DEPOSITS: Unlimited guarantee.
ITALY
– LIQUIDITY: The Italian government said it is ready to swap up to 10 billion euros in government bonds in temporary exchange for other forms of debt held by banks.
– BOND GUARANTEES: The Treasury will guarantee new bonds issued by banks until Dec 31, 2009, with a maturity of up to five years.
– DEBT GUARANTEE: Government said it is ready to underwrite bank debt and savings shares, if asked, without penalising corporate management for requesting help.
– BANK CAPITAL: Cabinet has passed a decree allowing the government to provide capital to banks in exchange for non-voting shares. No bank has yet asked for help from the government. Govt does not intend to hold banks' ordinary capital unless requested.
– BANK DEPOSIT: Guaranteed up to 103,291.38 euros.
JAPAN – 2 trillion yen ($20.62 billion)
– LIQUIDITY: BoJ to increase size/frequency of its commercial paper repo operations and temporarily broaden (until April 2009) the range of asset-backed commercial paper eligible for its market operations. To temporarily ease, until 2012, rules on banks' capital requirements.
– BANK CAPITAL: Existing law allows for recapitalisation of regional banks to encourage lending to small firms. Economics minister says big banks should be able to access public funds as well.
UNITED KINGDOM – 400 billion pounds ($655.9 billion)
– BANK CAPITAL: UK government to inject 37 billion pounds capital into three major banks — RBS, HBOS and Lloyds TSB — in the form of preference shares and as shares underwritten by the government. Banks may also access up to one billion pounds a year from the European Investment Bank, the EU's lending arm, to lend to small- and mid-sized businesses.
– GUARANTEE INTERBANK BORROWING: UK government to guarantee about 250 billion pounds in short- and medium-term borrowing by banks.
– LIQUIDITY: Bank of England to lend banks at least 200 billion pounds via auctions to make sure banks have enough cash to operate. This doubles its existing liquidity auctions and is in addition to three-month sterling and one-week dollar auctions.
– BANK DEPOSITS: Guaranteed up to 67,072 euros.
UNITED STATES – $700 billion plan, excluding Federal Reserve programmes
– BANK CAPITAL: The U.S. Treasury will inject $250 billion into qualifying domestic financial institutions, with stakes limited to $25 billion or 3 percent of risk-weighted assets. Half of total already committed to nine banks.
– BAD ASSETS: The Treasury can buy up troubled mortgage assets from financial institutions.
– BANK DEPOSITS: Insured up to $250,000 per account. The Treasury can lend an unlimited amount to the bank insurance agency to ensure depositors in failed banks are repaid.
– ACCOUNTING: Securities regulators can suspend mark-to-market accounting, blamed by critics for forcing financial institutions into insolvency when the market value of illiquid assets plunge or are unknown.
– LIQUIDITY: Federal Reserve operating various liquidity measures up to $900 billion, plus a commercial paper programme, and loans to individual companies like AIG and JPMorgan Chase.
– FED RESERVE PROGRAMME: Will buy up to $600 billion worth of money market mutual fund assets to boost liquidity.
OTHER COUNTRIES:
AUSTRALIA
– BANK DEPOSITS: The government said it will guarantee all new and existing bank deposits for three years. Will impose a fee for guaranteeing deposits of more than A$1 million.
– GUARANTEE WHOLESALE FUNDING: The government will guarantee all wholesale funding to Australian banks for five years.
– LIQUIDITY: A$4 billion ($2.71 billion) will be made available for mortgage-backed securities, to help maintain liquidity for non-bank lenders.
AUSTRIA – 100 billion euros ($128.6 billion)
– BANK CAPITAL: Up to 15 billion euros is earmarked for use as equity stakes. No bank has a legal right to the funds, which will instead be disbursed at the discretion of the Finance Ministry.
– GUARANTEE INTERBANK BORROWING: Up to 75 billion euros will be provided in guarantees for interbank lending. The guarantees will be given to a newly formed clearing house company managed by the banks.
– BANK DEPOSITS: Government has issued a blanket guarantee on savers' bank deposits, and put aside 10 billion euros to guarantee the deposits of small- and medium-sized companies.
BRAZIL
– BANK CAPITAL: Government would allow state-controlled banks Banco do Brasil and Caixa Economica Federal to buy stakes in other financial institutions.
– LIQUIDITY: Has sharply reduced reserve requirements for smaller banks and injected as much as 160 billion reais ($68.41 billion) into the banking sector. Has allowed bigger banks to use some of their reserve requirements to buy loan books of smaller banks.
BULGARIA
– BANK DEPOSITS: Government has increased the minimum bank deposit guarantee to 50,000 euros ($64,280).
– LIQUIDITY: Has eased regulations for banks' minimum reserves, keeping the rate at 12 percent but, as of Oct. 1, counting 50 percent of banks' cash in vault as bank reserves.
CHINA
– BANK CAPITAL: Government injected $19 billion into state-owned Agricultural Bank of China, the country's third-biggest bank by assets, as part of a restructuring. Bailout expected to cost $100 billion in total, due to AgBank's mountain of bad loans.
– LIQUIDITY: Central bank scraps lending quotas. Cuts lending and deposit rates. Lowers reserve requirements. Increases credit quotas for national and regional banks, and directs them to channel the extra loans mainly to smaller firms.
