Page last updated at 14:12 GMT, Sunday, 5 October 2008 15:12 UK

Bank aid may be needed - Cameron

David Cameron
David Cameron is seeking consensus on dealing with key measures

Further state support may be needed to help bolster the UK's fragile banking system, David Cameron has said.

The Conservative leader said the state might need to step in to supply capital to banks if conditions did not improve, admitting this could prove expensive.

But he stressed this would mean less risk for the taxpayer than buying up "toxic" loans, as proposed in the US.

Mr Cameron has offered support to the government in its efforts to deal with the current financial crisis.

Swedish model

The Tories have backed plans to increase the amount of deposits fully protected in the event of a bank's collapse to 50,000, and have offered to co-operate to pass new legislation to assist troubled firms.

But he told the BBC the government may need to go further than it had done in rescuing individual lenders such as Northern Rock and Bradford & Bingley, and provide support across the whole industry.

I think it is important that people know that politicians are prepared to work together over this
David Cameron

Helping banks rebuild their balance sheets so they were prepared to lend to each other and consumers again was essential, he said.

The government may have a role to play in "recapitalising" major High Street banks, he added, citing Sweden's decision to buy stakes in leading banks in the 1990s as a successful confidence-building measure.

"There is one only thing worse than state aid for banks and that is not doing anything," he told the BBC's Politics Show.

He stressed that such steps "may not be necessary" if the US government's bail-out plan for Wall Street helped to quickly restore confidence in global financial markets.

But he added: "I hope it is not necessary but if it is, it is something we would want to talk to the government about and make sure it is done in the right way."

Mr Cameron rejected suggestions this approach marked a U-turn after the Tories opposed the nationalisation of Northern Rock.

He said a political consensus on how to return the financial sector to health would help build public support for tough decisions ahead.

"I think it is important that people know that politicians are prepared to work together over this."

Chancellor Alistair Darling reiterated earlier on Sunday that he would do whatever it took to stabilise the banking system, saying that "some pretty big steps" were being considered.

Mr Cameron said it was important to tackle the causes of the current crisis as well as its repercussions.

The City's bonus culture needed to be "looked at", he said, adding that he would support regulators if they decided to clamp down on payments to individuals which encouraged excessive risk-taking.

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