By Marcus Leach
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.”
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