Page last updated at 17:00 GMT, Monday, 19 January 2009

Bank shares fall despite new plan

RBS sign, Lloyds TSB sign, Barclays sign
Banks were the top fallers on Monday

Shares in the UK's biggest banks have fallen sharply despite the government's announcement of a second package of measures to help the sector.

Royal Bank of Scotland (RBS) fell 67% to 11.6 pence after the bank warned it was heading for a record loss in 2008.

Analysts said RBS's gloomy forecast had put pressure on other banking shares, particularly Lloyds Banking Group, whose shares closed down 34% at 65p.

HSBC ended 6.5% lower at 501p, despite saying it did not need government help.

Banking shares around Europe were also affected by the RBS news.

BNP Paribas, Deutsche Bank and Societe Generale were all between 8 and 15% lower.

New steps

Amongst a wide-ranging package of measures designed to encourage lending, the government said it would offer insurance against banks losing more money from the bad debts that started the credit crunch.

It's piecemeal, and it's just fighting fires
Marc Ostwald, Monument Securities

The Bank of England will also be able to buy up to 50bn worth of stakes in companies in all sectors of the economy.

But some analysts said the measures would not provide a lasting solution to the problems affecting the financial system.

"It's piecemeal, and it's just fighting fires," said Marc Ostwald, at Monument Securities.

"The plan doesn't address how to get rid of toxic assets."

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