Treasury changes Credit Guarantee Scheme to allow banks to reduce Government support
This was published under the 2010 to 2015 Conservative and Liberal Democrat coalition government
The Treasury is changing the rules of the Credit Guarantee Scheme (CGS) to allow banks to reduce their participation in the scheme ahead of schedule.
Today the Chancellor has announced that the Treasury is changing the rules of the Credit Guarantee Scheme (CGS) to allow banks to reduce their participation in the scheme ahead of schedule.
The move demonstrates that the UK banking sector is returning to a stable footing and will allow banks to start reducing their reliance on the UK taxpayer, while they return to normal market financing, without Government support.
The changes to the scheme will allow institutions that have issued guaranteed debt under the Scheme to buyback and cancel the debt before the debt was scheduled to mature. This Buyback Facility will be subject to certain conditions and the payment to HM Treasury of a cancellation fee.
Speaking after the announcement, the Chancellor George Osborne said:
That the Government is able to do this shows that the UK banking sector is clearly on the mend. It is in everyone’s interest that banks return to stability and that as they do they are able to lessen the amount that they depend upon the taxpayer.
We do though need to go further. The Government will push forward with reform to financial services within the UK and make sure that we put in place a stronger and more reliable regulation to ensure that we do not put the taxpayer in this situation again.
Notes for Editors
The 2008 Credit Guarantee Scheme was introduced to support the stability of the financial system.
The scheme was intended to provide the financial system with sufficient liquidity in the short term, while making available new capital to UK banks and building societies to strengthen their resources, permitting them to restructure their finances, while maintaining their support for the real economy; and ensuring that the banking system has the funds necessary to maintain lending in the medium term.
The Scheme became operational on 13 October 2008 and closed to new issuance on 28 February 2010.
From 8 June 2011 the UK Government’s 2008 Credit Guarantee Scheme (‘the Scheme’) for UK incorporated banks and building societies will be amended to allow institutions that have issued guaranteed debt under the Scheme to buyback and cancel the debt before the scheduled maturity date, subject to certain conditions and payment of a cancellation fee. This will be undertaken through a ‘buyback facility’ operated by the Debt Management Office (DMO) as part of the Scheme.
Full details of the updated rules of the Scheme and the market notice are available on the Debt Management Office website (external website, opens in new window)
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