Commission approves modifications to UK financial support measures

23 December 2008

The amendments mainly concern the fee payable on guaranteed liabilities and the widening of the range of currencies in which the guaranteed instruments can be issued.

The Commission approved the modifications to the UK support measures to the banking industry. The amendments mainly concern the fee payable on guaranteed liabilities and the widening of the range of currencies in which the guaranteed instruments can be issued.

 

Concerning the UK Guarantee Scheme the main amendments concern the following basic features:

Ø       The UK will, as of 1 January 2009, also guarantee debt instruments issued in Japanese yen, Australian dollars, Canadian dollars and Swiss francs. Previously, the eligible debt was limited to instruments in sterling, US dollars or euros.

Ø       The fee payable on guaranteed liabilities will be based on a per annum rate of 50 basis points plus 100% of the institution's median five-year Credit Default Swap (CDS) spread during the period 2 July 2007 to 1 July 2008. This fee will apply retrospectively to all guaranteed issues under the original scheme since its launch on 13 October 2008.

Ø       As in the original Guarantee Scheme, the initial term of the instruments guaranteed under the amended scheme will remain no longer than three years. However, participating institutions will now be able to roll over the guarantee on some individual instruments for an additional two years, ending in April 2014. The proportion of the guaranteed liabilities that can be rolled over in this fashion shall not exceed one third of the overall guaranteed liabilities.

 

In addition, the requirement of a balance sheet growth limitation to certain thresholds in the Guarantee and Recapitalisation Scheme will no longer apply to those banks that can be considered as fundamentally sound.

 

Press release

 

© European Commission