Details of insurance for loans to RBS and Lloyds to be published

The Treasury says it will publish the legal documents that will be signed by Royal Bank of Scotland and Lloyds Banking Group to buy insurance from the government for their troublesome loans. The move is an attempt to counter critics who are concerned that the banks could abuse the £585bn scheme.

Lord Myners, City minister, said the agreements would demonstrate that the banks would not be encouraged to force companies whose loans are included in the so-called asset protection scheme into liquidation. The Treasury is keen to counter the argument that is being suggested by some critics that because the banks will be insured for their losses, they will have little incentive to renegotiate loans.

The responsibility for ensuring this will not happen will fall to the Asset Protection Agency, the body set up to run the scheme at arm's length from the Treasury.

The APA will also have to decide on a case-by-case basis about how to treat loans when they maturing.

The Treasury is recruiting a £140,000-a-year chief executive for APA, which will be the second body created as a result of the bank bailout. UK Financial Investments looks after the taxpayer's stakes in RBS and Lloyds and will soon take responsibility for Northern Rock.

Through the headhunters Spencer Stuart, the Treasury is also looking for a head of risk, head of service management and head of operations for APA, which is being set up ahead of the finalisation of the insurance scheme for Lloyds and RBS.

Myners said the agreements would be completed "during the summer". The City is keen for the agreements – which will require both banks to issue B shares to the government – to be reached ahead of the publication of their interim results in August. Both banks will also need to hold shareholder meetings to ratify the terms.

Lloyds and RBS will both be covered for 90% of their losses after they have incurred £35.2bn of losses in the case of Lloyds and £42.4bn in the case of RBS. At the current rate of accumulating bad losses, this so-called "first loss" could be burnt through by the end of next year.

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Another kick in the teeth!

New blow for homeowners as Lloyds INCREASES cost of mortgages - days after getting £5.5bn taxpayer lifeline

Lloyds TSB is hammering families with higher mortgage costs only days after securing a £5.5billion taxpayer lifeline.
It not only refused to pass on last week's Bank of England rate cut for its new tracker mortgages, but from today it will increase rates on its trackers by between 0.3 and 0.5 per cent.
The bank is being quasi-nationalised under the Government's rescue scheme. It also stands to gain control of the country's largest mortgage book after Gordon Brown eased its takeover of ailing Halifax Bank of Scotland.

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Englishman's home no longer his castle as downturn bites

Is an Englishman's home still his castle? The credit crunch forcibly ended the national obsession with buying houses and the impending recession seems to have put the brakes on our love of DIY as well.

Argos owner Home Retail says profit will be at bottom end of forecasts. A sales drop of more than 10pc at gardening and home improvement retailer Homebase was the result of consumers restricting spending on all but the essentials as much as a wet summer, according to Homebase and Argos owner Home Retail Group.

There is no evidence homeowners are turning to repairs and building extensions instead of moving house, chief executive Terry Duddy said.

Financial crisis: Government borrowing at highest level since 1946

Public sector borrowing reached its highest level since 1946 in the first six months of the financial year, even before the Chancellor begins implementing a strategy to spend his way out of the economic downturn.

Alistair Darling's original forecast that full-year borrowing would reach £43bn now looks even further out of reach PA Borrowing was £8.1bn in September, taking the total to £37.6bn in the first half of the year, some 75pc higher than at the same point last year, and the highest since records began when Britain started rebuilding the country after the Second World War.

It was significantly higher than the £6.6bn monthly figure expected by economists, who described the unexpected jump as alarming.

UK recession is here to stay, experts warn

Filing into Number 11 Downing Street last Thursday morning, Britain’s banking chiefs were aware that the eyes of the country were once again upon them.

Former US President Harry Truman said” it's a recession when your neighbour loses his job; it's a depression when you lose yours”.

John Varley, chief executive of Barclays, Eric Daniels, his opposite number at Lloyds TSB and Royal Bank of Scotland director Gordon Pell had been summoned to sit down with Chancellor Alistair Darling and Business Secretary Lord Mandelson to talk about corporate lending.

That they were told to come to the Chancellor’s residence and not the more discreet environs of the Treasury was significant. Having signed off on a £37bn capital injection into three of the country’s biggest banks, the Government was keen to show it was acting to shore up the real economy, all too aware that the events of an extraordinary week meant it was under scrutiny from a general public suddenly fearful for its future. It was the week in which small businesses across Britain awoke to the fact that, while the Government might have succeeded in averting a banking meltdown, a recession was inevitable.

The flow of bad news seemed inexorable. The pound fell to its lowest level against the dollar in five years, carmakers signalled a return to the 1970s after reintroducing the three-day week and retailers braced themselves for the worst Christmas in more than a decade. All of that against a backdrop of soaring government spending and dwindling tax receipts.