Page last updated at 19:32 GMT, Sunday, 12 October 2008 20:32 UK

PM says banking crisis will ease

EU may adopt UK bail-out plan

UK Prime Minister Gordon Brown has said he believes confidence in the banking system will be restored by global action "in the next few days".

"The decisions we take over the next few days will affect us for the years ahead," he said.

Mr Brown was speaking in Paris after briefing eurozone leaders on details of his rescue plan for British banks.

The EU leaders later announced a crisis plan - including recapitalising banks and guaranteeing inter-bank lending.

French President Nicolas Sarkozy - the current European Union head - said the group had pledged that no major financial institution would be allowed to collapse.

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Robert Peston, BBC business editor

Meanwhile, the BBC learned that four of Britain's biggest banks will ask for up to 40bn of taxpayers' money as capital to boost their balance sheets.

Royal Bank of Scotland, HBOS, Lloyds TSB and Barclays are in talks with the Treasury, the Bank of England and the Financial Services Authority.

An announcement is planned before the markets open on Monday, BBC business editor Robert Peston says.


Mr Brown met French President Nicolas Sarkozy at the Elysee Palace before addressing the 15 eurozone leaders.

The head of the European Commission and governor of the European Central Bank were also present at the talks with Mr Brown and Mr Sarkozy.

Mr Sarkozy said he wanted to "maximise" efforts by European leaders to deal with the global financial crisis, which has seen global equity markets go into freefall and the collapse of several leading international banks.

The meetings came after the International Monetary Fund warned the world's financial system was "on the brink of systemic meltdown".

Speaking after his address to EU leaders, Mr Brown said: "The eyes of the world are looking to their governments to help restore confidence in markets. The most precious asset we have lost is confidence, something that we will restore through co-ordinated intervention."

Mr Sarkozy said leaders had agreed a framework in which individual countries would be able to inject capital into their own banks by means of preference shares.

He said governments in Germany, France and Italy among others would be presenting their individual plans on Monday, within the agreed framework.

Earlier in a newspaper article, Mr Brown said he would urge his European counterparts to copy the UK's 500bn economic rescue package announced earlier this week.

The scheme will see the government take significant stakes in banks - in effect part-nationalising them.

Mr Brown pledged Britain would "lead the way" through the global financial crisis.

In other developments:

  • A report by auditing firm Ernst and Young predicted a recession in Britain by Christmas, with insolvencies peaking in 2009/10.
  • The French cabinet will hold a special session on Monday to approve a bill offering state guarantees and recapitalisation to banks in trouble.
  • Portugal's finance minister has also announced a 20bn euro ($27bn; 16bn) state guarantee for banks.
  • A Treasury delegation is in Reykjavik for talks to resolve the dispute over frozen UK investments held in failed Icelandic banks. Significant progress is said to have been made.
  • A YouGov survey for the Sunday Times suggests Mr Brown and Mr Darling are more trusted by the public to the run the economy than their Conservative opposite numbers by a margin of 33% to 27%.

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