Purposes of the Scheme

1. The UK Government’s 2008 Credit Guarantee Scheme for UK incorporated banks and building societies debt issuance will operate as set out below.

Purposes of the Scheme

2. The Scheme forms part of the Government’s measures announced on 8 October 2008, to ensure the stability of the financial system and to protect ordinary savers, depositors, businesses and borrowers.

3. In summary these measures are intended to:

  • provide sufficient liquidity in the short term;
  • make 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
  • ensure that the banking system has the funds necessary to maintain lending in the medium term.

Access to the Guarantee Scheme

4. UK incorporated banks (including UK subsidiaries of foreign institutions) that have a substantial business in the UK and UK building societies, are eligible to participate in the Scheme. Any other UK incorporated bank (including UK subsidiaries of foreign institutions) may apply for inclusion. In reviewing these applications, the Government will give due regard to an institution’s role in the UK banking system and in the overall economy.

5. Within a banking group, only a single entity may participate in the Scheme. This will typically be the primary UK deposit-taker, subject to any exemptions granted by HM Treasury. Debt issued by other entities within the group will not be eligible to be guaranteed under the Scheme, unless agreed by HM Treasury.
6. In order to be eligible to participate in the Scheme, an institution must have raised, or committed to raise within the required timeframe, Tier 1 capital in the amount and in the form the Government considers appropriate, whether by Government subscription or from other sources. (Please refer to the Rules document for the requirements that need to be met before an application can be made). For a list of current eligible institutions please visit HM Treasury website www.hm-treasury.gov.uk which will be updated as appropriate.

7. The scale of each participating institution’s access to the Scheme will be based, at the discretion of HM Treasury, on an institution’s sterling Eligible Liabilities as calculated by the Bank of England. Please go to the Bank of England website www.bankofengland.co.uk for further information on Eligible Liabilities.