Britain will announce a rescue package for the UK banking system on Wednesday, finance minister Alistair Darling said. A government source with knowledge of the plan said on Tuesday details were still being thrashed out but the package was likely to include public money being injected into banks.
However, the source played down media speculation the plan would include a stand-by facility to ensure that no banks run out of cash. Darling and British Prime Minister Gordon Brown met the heads of the Bank of England and Financial Services Authority on Tuesday evening for what the government said were talks on stabilising the banking system.
"We have been working closely with the governor of the Bank of England, the FSA and the financial insitutions to put the banks on a longer-term sound footing," Darling said. "I intend to make a statement before the markets open tomorrow morning and I will make a statement to the House of Commons later in the day," he added in a televised statement.
Pressure mounted on the government to take swift action to restore confidence after shares in the UK's major banks plunged. Governments around the globe are fighting to unfreeze lending and borrowing brought to a halt by fears of hidden losses. In the latest of a series of emergency moves, Iceland's authorities took over the country's second-largest bank and Russia announced an aid package for its financial sector on Tuesday.