Please turn on JavaScript. Media requires JavaScript to play. The UK government is poised to announce details of a £50bn rescue package for the banking system, the BBC's business editor has learned. It will include a proposal to use taxpayers' money to invest in banks - in effect part nationalising them. The dramatic initiative is aimed at stabilising the financial system and making sure banks have enough cash. The news comes after a day of steep falls in UK banking stocks and a high-level Downing Street summit Chancellor Alistair Darling said he would make a statement before financial markets opened on Wednesday morning and address the House of Commons later in the day. It matters to all of us that the ambitious plan works - not least because the reluctance of our banks to lend to companies and households is sending the economy into recession.

Robert Peston, BBC business editor

Read Robert's blog Prime Minister Gordon Brown earlier held talks with Bank of England Governor Mervyn King. Mr Darling and the chairman of the Financial Services Authority, Lord Turner, also took part in the discussions. The announcement comes amid a series of dramatic developments in the world financial system: US President George W Bush called for co-ordinated action by leading industrialised countries to tackle the credit crunch Bush urges joint response

UK bank shares took a big pounding. HBOS dropped 42%, Royal Bank of Scotland (RBS) fell 39%, Barclays shed 9% and Lloyds TSB was down 13%. Bank shares take pounding

The Icelandic government took control of the country's second biggest bank, Landsbanki, which owns UK internet bank Icesave Iceland takes over Landsbanki

European Union finance ministers agreed to increase the guarantee for customers' bank savings accounts to at least 50,000 euros EU moves to reassure bank savers

The British Chamber of Commerce said that the UK was already in recession UK economy 'already in recession'

The International Monetary Fund warned the economic downturn in many countries was likely to worsen as the financial crisis continued IMF warns of 'severe downturn' 'Big moment' The BBC's business editor Robert Peston said the Treasury had been working on the plan for weeks. "In a UK context, this is a very big moment," he said. It will involve investing taxpayers' money in banks, which should make them stronger and more confident to lend, he said. To address the collapse of confidence in money markets, the standby facility should ensure big banks have enough cash to fund day-to-day operations. "We need a full and comprehensive plan. We don't need any more step-by-step measures," said Peter Hahn, a banking expert at the Cass Business School. "Markets should react positively but we need to know what the details are." 'Day of reckoning' Liberal Democrat leader Nick Clegg said Wednesday would be a "real day of reckoning for the whole British economy". He said the announcement needed to restore certainty and confidence to get banks lending to each other, and to customers, again. The government also needed to explain how taxpayers' interests would be safeguarded if the government was going to take stakes in UK banks, he added. The shadow chancellor, George Osborne, said it was important that the government allayed the public's fears about their savings and their jobs. "If the taxpayer is providing support to the banks then that should be used to help small business stay afloat, help the family struggling at the moment with rising bills and shouldn't be used to pay the bonuses of bankers," he said. Shares hit Banking shares dropped after the bosses of the biggest UK banks met at the Treasury on Monday evening - raising fears that the sector needs government intervention. Monday's meeting was attended by Mr Darling, Mr King and Lord Turner, as well as representatives of RBS, Barclays and Lloyds TSB. Meanwhile, customers of the Icesave internet bank have been warned they will probably have to claim compensation for money held in their savings accounts. UK authorities are preparing for the bank's parent in Iceland, Landsbanki, to be declared insolvent and the bank is not allowing savers to withdraw their cash. Icesave has 350,000 savers in the UK and Netherlands, with about £4.5bn of deposits.



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