The Treasury has released details of a debt help package being made available to UK banks in order to support them through the turmoil in the financial markets.
It is making capital investments in Royal Bank of Scotland and will also invest into Lloyds TSB and HBOS after their merger is completed.
A total of £37 billion will be supplied to these organisations in order to boost confidence and kick-start the mortgage market.
By doing this, the Treasury hopes to “help stabilise their position and support the long term strength of the economy,” it stated.
The government has decided to take action in order to protect savers, businesses and borrowers and to “safeguard the interests” of taxpayers.
It comes after the Bank of England lowered interest rates in a coordinated move with several central banks from around the world.
Meanwhile, it has emerged that several British councils have millions invested in Icelandic banks that have collapsed, leading to fears that council tax will have to rise.
By Jamie Price