Tuesday, October 07, 2008
uk to inject capital directly into banks
UPDATE: the ft:
- First - we are extending the SLS at the Bank of England, allowing £200bn available.
- Second - helping banks recapitalise. Britain’s biggest banks have agreed to increase capital by £25bn. There is a further £25bn should they want it.
- Third - we have agreed to guarantee interbank lending.
right out of the roubini playbook. jpmorgan analysis is positive.
trouble is, of course, that recapitalization will not halt delevering, which has taken on a life of its own -- and asset prices may have much further to go to the downside. if so, this may be just the first british bank recapitalization.
UPDATE: more helpful analysis from minyan peter:
As I read it, what the UK is proposing to buy is preferred stock. And while this is technically Tier 1 capital (the best kind), in a liquidation scenario, preferred stock is senior to common. And by going in at this more senior level, the UK government is essentially admitting that bank liquidation is still a possibility. To me, that's not a helpful market message.