Taxpayers are poised to take on the “toxic” debts of High Street lenders in a new bank rescue deal which could cost taxpayers billions of pounds.
Under the “pay as you go” plan, details of which were still being hammered out on Saturday, the Government will create a new insurance scheme that would see liabilities of up to £200 billion potentially kept on the public books for years.
Taxpayers would not face an immediate upfront cost but could be hit with payments in future if banks’ assets fell below a certain level.
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The insurance scheme has won favour at the expense of alternative plans to create a “bad” bank under which the Government would have simply bought banks’ existing toxic debts.
The latest rescue plan comes amid growing concern that lenders are about to unveil losses for 2008 that will shock the market.