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Britain unveils 50 bln stg bank rescue package

LONDON - Britain will inject up to 50 billion pounds ($87.2 billion) of government money into the country's banks as part of a multibillion pound package to shore up the financial system.

After frantic overnight talks that followed dramatic falls in the share prices of some of Britain's biggest banks, Finance Minister Alistair Darling rushed out measures on Wednesday he said would help boost lending and restore confidence.

"This is beginning a process of un-bunging a big problem where banks won't lend to each other for long periods," Darling said.

Under the plans, Britain will offer banks short-term liquidity, make new capital available to banks, and aims to give the banking system enough funds to maintain lending in the medium term.

The decision follows days of crippling pressure on British banks, some of which have lost nearly half their value on the stock market amid investor fears they could collapse if they are not handed a massive liquidity lifeline.

HBOS, which last month agreed to be taken over by rival Lloyds in a government-brokered deal, welcomed the plan, and shares in both banks rose sharply.

"The government's announcement represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system.

"HBOS believes that this initiative is very much in the interests of its shareholders and customers."

HBOS was the biggest sector loser on the market on Tuesday. It lost more than 40 percent of its value, while Royal Bank of Scotland dropped 39 percent.

Darling and Prime Minister Gordon Brown will hold a press conference later on Wednesday in which Brown is expected to say bold and far-reaching action is needed to tackle the global financial crisis.

"Extraordinary times call for bold and far-reaching solutions," he will say at the conference scheduled for 9 a.m. (0800 GMT), according to extracts released by Brown's press office.

Darling and Brown met the heads of the Bank of England and Financial Services Authority (FSA) on Tuesday.

Governments around the globe, from Iceland to South Korea, are fighting to unfreeze lending and borrowing brought to a halt by fears of hidden losses in financial institutions.

It was unclear whether Britain's rescue plan, which follows the U.S. decision to provide more than $700 billion in a bailout of banks and financial institutions, would be enough to restore market confidence following days of near panic.

"Barring the announcement of a particularly radical and fast-acting package, the market is unlikely to find much short-term stimulus from any unilateral plan," said Martin Slaney, head of derivatives at GFT Global Markets, in a research note.