Banking: Insurance

House of Lords written question – answered on 11th March 2009.

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Photo of Lord Dykes Lord Dykes Spokesperson for Foreign and Commonwealth Affairs, Spokesperson for Environment, Food and Rural Affairs

To ask Her Majesty's Government what has been the effect so far of the inclusion of an insurance guarantee cover for the banks to provide resumed lending activity.

Photo of Lord Myners Lord Myners Parliamentary Secretary, HM Treasury

Prompted by continuing exceptional instability in the global financial markets, in October the Government announced a package of support for the financial system both to support stability of the banking system and to protect savers and depositors. Part of this package is the credit guarantee scheme (CGS). The CGS provides a Government guarantee on eligible new debt to support the stability of the banking system, and to protect savers and depositors.

As part of further measures to increase confidence for banking institutions to lend, the asset protection scheme (APS) was announced in January this year, to encourage banks to lend by offering capital and asset protection to banks on assets most affected by the current economic conditions. Under the scheme, the Treasury will provide participating institutions protection against credit losses. The scheme is aimed at targeting assets with the greatest amount of uncertainty about their future performance. Participating banks also agree a lending commitment addressing lending to businesses and homeowners. As the Chancellor announced details of the scheme on 26 February it is too early to measure its effect.

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