Royal Bank of Scotland (RBS) is to use the taxpayer-backed special liquidity scheme (SLS) for as much as £34bn worth of funding, reports The Telegraph.
The lender's move is further proof that the funding crisis is as severe as ever. By securitising a book of mortgages, RBS will be able to access funding from either the SLS should it need further funds.
The Treasury suffered a record £16bn plunge into the red last month as the recession hit tax revenues, according to The Times.
The ongoing downturn undercut receipts of Income Tax, National Insurance, VAT, Stamp Duty and Capital Gains taxes while driving up benefit costs as unemployment has risen. Adding to the problems, the number of people claiming unemployment benefit also rose by 75,700 this week to 1.07 million.
Vicky Redwood, analyst at Capital Economics, said: "The public finances look pretty awful. "It is just worrying that they are that bad this early on in the recession."
The Pound dropped to within 5p of the Euro on Thursday, falling to a fresh record low against the single currency for the ninth successive day, reports the Financial Times.
Sterling fell to 95.5p against the Euro for the first time fuelling speculation that the BoE will follow the US Federal Reserve and cut rates to almost zero.
The news comes as tensions increased between the Treasury and the BoE over how to get banks lending again. Charlie Bean, deputy governor of the BoE, said that the deteriorating economic outlook could see UK interest rates falling close to zero.
Treasury officials said that a further taxpayer injection of cash might be needed at some point, adding that the first priority in the New Year was to generate cash and confidence to encourage banks to start lending again.
Have your say:
"Perhaps AIFA, AMI, Cherry etc should be able to ask for money under the special liquidity scheme so they can fund adverts on TV to compete with NatWest's money guidance etc! Perhaps the OFT should be looking at why banks are being subsidised and their competitor advisers are not as banks still claim to be "advisers" and the RDR allows them, but banks are getting govt funding and IFAs are being asked to do the reverse, i.e. increase capital adequacy!" Phil Castle, Director, Financial EscapeIFAonline
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