Treasury statement on the banking industry

LONDON (Reuters) - The following is the statement from the Treasury on support for the banking industry:

With continuing exceptional instability in the global financial markets, the Government is today taking decisive action, by implementing the comprehensive set of measures it announced on 8 October, to make commercial investments in UK banks and building societies to help stabilise their position and support the long term strength of the economy.

The overall aim of these measures is to support stability in the financial system; to protect ordinary savers, depositors, businesses and borrowers; and to safeguard the interests of the taxpayer. In summary, the measures intend to:

* provide sufficient liquidity in the short term;

* make available new tier 1 capital to UK banks and building societies to strengthen their resources permitting them to restructure their finances, while maintaining their support for the real economy, through the recapitalisation scheme which has been made available to eligible institutions; and

* ensure that the banking system has the funds necessary to maintain lending in the medium term through the credit guarantee scheme available to eligible institutions in relation to new short and medium term debt issuance.

The authorities have continued their detailed discussions with the institutions who confirmed their participation in the recapitalisation scheme last week. These institutions committed in aggregate to increase their total tier 1 capital, either through their own actions or, where requested, through support from the Government's recapitalisation scheme in the form of preference and ordinary share capital.

The Government is making capital investments to RBS, and upon successful merger, HBOS and Lloyds TSB, totalling 37 billion.

Following the completion of these capital investments, each of the above institutions will have a Tier 1 capital ratio in excess of 9%, well above international minimum standards and at a level that should put them on a strong footing for the future.  Continued...