UK share prices crashed yesterday, wiping over £85bn off the London Stock Exchange, with the FTSE 100 index crashing 391 points or 7.85% to 4589 points, the biggest one day fall since 1987.
On a day of uncertainty and panic, the FTSE fell 100 points as chancellor Darling was making a statement to MPs on the financial crisis, when he said that he was releasing another £40bn of taxpayers’ money today to prop up the banks.
Share prices in HBOS fell 18% and Royal Bank of Scotland by 21%.
Darling assured MPs in the House of Commons: ‘I’ve made it clear that we will do whatever is necessary to maintain stability.’
He added: ‘It’s essential that we take action to both support the banking system as a whole – as well as being ready to intervene in particular cases when it’s necessary to do so.’
He said: ‘Since April, the Bank of England, with support from the government, introduced the Special Liquidity Scheme, providing funding to the banks.
‘The government has made available in excess of £100bn of long-term funding to be lent through the scheme, and the Bank of England has extended it until January.’
He added: ‘The Bank of England has also continued to inject substantial funds into the markets through its normal operations. . .
‘Tomorrow it will put in another £40bn, taking a wider range of security, and these operations will continue into November.’
Darling also announced that the depositors guarantee scheme was being upped to cover £50,000.
Meanwhile, in America billions more dollars were wiped of share prices on Wall Street, despite the $700bn bail out beginning to kick in.
Just a couple of hours after opening, the Dow Jones Industrial fell below 10,000 points for the first time in four years to 9,881 points, a drop of over 477 points or just under five per cent.
Paris showed a loss of 8.44% and Frankfurt had shed 7.01%.
Uncertainty was fuelled by the German government’s failure to come completely clean as to whether it was guaranteeing all bank depositors’ savings.
Following the first meeting of his National Economic Council war cabinet, UK premier Brown said he will speak to German chancellor Merkel to clarify her stance on protecting German bank accounts.
Meanwhile, the Iceland government announced it is offering an unlimited guarantee for all bank customers’ savings accounts.
The move came after trading was suspended in Iceland’s three biggest banks – Kaupthing, Landsbanki and Glitnir – and three other financial groups, Straumur-Burdaras, Exista and Spron.