Workers Revolutionary Party

BANK SHARES COLLAPSE! – Brown and bankers meet at 10 Downing Street

Billions more pounds were wiped off UK bank shares, yesterday, in the wake of Monday’s falls which saw £93bn wiped off the London Stock Market.

The chief executives of Royal Bank of Scotland (RBS), HBOS, Lloyds TSB and Barclays met chancellor Darling on Monday night, along with Bank of England governor Mervyn King and Financial Services Authority chairman Adair Turner.

It is understood they told Darling they are broadly in accordance with a government plan to swap state funds for bank shares.

Speculators continued to sell off banking shares yesterday in a bid to force the government’s hand to prop up the banks with a multi-billion injection of taxpayers’ money.

Hardest hit was the RBS, which saw a 42% slump in its share price. HBOS fell by 23%, Lloyds TSB by 17% and Barclays by 11%.

The UK cabinet at Downing Street met yesterday and emerged with no minister willing to make a statement.

In the wake of Monday’s share price crash, visiting New York Mayor Michael Bloomberg told reporters outside Downing Street: ‘It’s not the markets that are shutting down. The banks are shutting down.’

Left Labour MP John McDonnell called on chancellor Darling to report back in the House of Commons on the morning’s meeting of EU finance ministers in Luxembourg.

This announced a Europe-wide lifting of the limit on bank depositors’ guarantees from 20,000 euros to 50,000 euros (£37,000).

It had been suggested that all countries could guarantee up to 100,000 euros to stop people moving their money to banks in other countries.

Almost immediately the Netherlands broke ranks and upped its limit to 100,000 euros.

The French finance minister Christine Legard said ‘our priority is to protect savers rather than those who run the financial institutions’.

Meanwhile, the UK banking crisis has become a subject of discussion in Europe.

French economist Phillipe Legrain said: ‘The time for half-measures is over. Britain is no longer in the grips of a credit crunch or even a financial crisis, it is suffering a full-on financial heart attack.’

He warned: ‘Unless credit starts flowing again soon, a nasty recession, conceivably even a depression, looms, and with it massive job losses, bankruptcies, repossessions and a sharp fall in living standards. The government needs to act – now.’

Meanwhile, Iceland’s second-biggest bank, Landsbanki went into receivership and was nationalised.

‘The Icelandic Financial Supervisory Authority (IFSA) has, under powers granted by the Icelandic parliament, proceeded to take control of Landsbanki,’ the government agency said in a statement.

All savings deposited by Icelanders were protected, IFSA officials reassured.

However, the internet arm of Landsbanki, Icesave, stopped British customers withdrawing or depositing money.

Prime Minister Geir Haarde had warned in a televised speech on Monday that ‘the Icelandic economy, in the worst case, could be sucked with the banks into the whirlpool and the result could be national bankruptcy’.

The country’s central bank said yesterday that Russia had agreed to grant it a loan of four billion euros.

The bank added: ‘This loan significantly bolsters the foreign exchange reserves of the central bank of Iceland and thus underpins the stability of the exchange rate of the krona.’

Trading in all financial shares, including all the major banks, remained suspended on the Reykjavik stock exchange.

In Tokyo, the central bank, the Bank of Japan held its super-low interest rates unchanged at 0.5%, where they have been since February 2007.

Bank of Japan governor Masaaki Shirakawa said central banks should set monetary policy based on the health of their own economies.

Joint action may result in one country doing something that is not favourable for its own economy, he said, adding: ‘Each country will make its own decision considering its own conditions.’

Brown and Darling were meeting with financial representatives yesterday evening.

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