The British government has announced another series of measures aimed at helping banks resume lending.
The plan includes an even larger government stake in the Royal Bank of Scotland and a new taxpayer-backed insurance scheme to protect banks from future bad loans.
In October, the British Treasury ploughed £37bn into the banking system, but the bailout did not result in banks resuming normal lending to business.
Today's massive new multi-billion pound package is designed to kickstart that lending. The new insurance scheme could see liabilities of up to £200bn kept on the public books for years to protect banks from future bad loans.
Lenders would have to identify their riskiest assets, which they could then insure with the government for a fee. They would still be liable for initial losses but could at least put in a ceiling, boosting confidence.
The plan is a huge gamble with taxpayers' money but the British government's hope is that once the banks start lending again the losses will not occur.
And in a move that presages full nationalisation, the plan also includes the government increasing its stake in the Royal Bank of Scotland from almost 60% to 70%.
Royal Bank of Scotland, which owns Ulster Bank and First Active, said this morning that it expects losses of between £7bn and £8bn for 2008.
