Page last updated at 16:15 GMT, Saturday, 3 January 2009

Treasury mulls new bank bail-out

Alistair Darling
The Chancellor is expected to reveal new measures within weeks

A further bail-out for the UK's banks is being considered by the government, Treasury sources have confirmed.

Chancellor Alistair Darling is creating a new package of measures aimed at tackling the economic slowdown, with a fresh cash injection a possibility.

Sources say no decisions have been made but creating a "bad bank" where "toxic assets" could be left, or exchanged for government bonds, is being considered.

The government has already pumped 37bn into shoring-up struggling banks.

The ability of businesses and homebuyers to obtain credit is seen as key to economic recovery.

'Politically difficult'

BBC political correspondent David Thompson says a fresh injection of cash "would be politically difficult".

"There's already anger that the banks are failing to respond to needs of businesses and homebuyers," he says.

"Opposition parties would claim that giving them more money was evidence that the government's original plan to revive the economy had stalled.

"However, ministers would be likely to argue that any flak would be worthwhile if a second bail-out helped shore up the already fragile banking sector - and got it lending to the public once again."

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