London - Britain said Monday it would inject a surge of public money into three ailing banks, as other countries announced similar steps and London's plan was praised by the new Nobel economics laureate.
Shares in London soared on the news that up to £37bn was being pumped into Royal Bank of Scotland (RBS), HBOS and Lloyds TSB.
While insisting his government was not taking permanent stakes in banks, Prime Minister Gordon Brown said it had to be a "rock of stability" during the global credit crunch and revive confidence in financial institutions.
The bail-out was "unprecedented but essential for all of us," he told reporters.
"For savers, for small businesses, and for homeowners, we must in an uncertain and unstable world be the rock of stability on which the British people can depend."
The government could end up owning more than 60% of RBS and 43.5% of a combined Lloyds TSB-HBOS entity, through a combination of buying shares and underwriting share issues.
Senior bank executives have stepped down. The government was appointing three directors to the RBS board and two to Lloyds TSB.
Meanwhile the Bank of England provided a short-term secured loan of up to £100m to stricken Icelandic bank Landsbanki "to help maximise the returns to UK creditors," finance minister Alistair Darling told parliament.
The money is to help repay cash to British savers with money frozen in Iceland's second-biggest bank, as the island's financial sector totters on the verge of collapse.
The £37bn announcement was the first implementation of a rescue package for banks that was unveiled last week, which made available £50bn to inject cash into financial institutions in return for shares.
The plan also makes available £450bn in cash for banks and guarantees, to encourage banks to start lending to each other again - a crucial function for the world economy.
Brown insisted the government's shares would be held temporarily and "at arm's length" to be sold once the banks are sufficiently strengthened.
"This is perhaps the first government to do what I believe a large number of governments are going to do over the next few days," he said.
Brown - who spent 10 years as finance minister throughout Tony Blair's premiership - has won plaudits for his swift action plan.
Shot in the arm
European governments launched their own multi-pronged attacks on the finance crisis Monday, approving more than a trillion dollars in loans and providing a shot in the arm to ailing world financial markets, with Germany, France and Spain announcing large-scale bail-outs.
US economist Paul Krugman, a fierce critic of US President George W. Bush's handling of the global financial crisis, won the Nobel Economics Prize on Monday.
In his New York Times newspaper column Sunday, Krugman said Brown and Darling "have defined the character of the worldwide rescue effort, with other wealthy nations playing catch-up.
"The Brown government has shown itself willing to think clearly about the financial crisis, and act quickly on its conclusions," he wrote.
"And this combination of clarity and decisiveness hasn't been matched by any other Western government, least of all our own.
"The British government went straight to the heart of the problem - and moved to address it with stunning speed.
"Luckily for the world economy... Brown and his officials are making sense. And they may have shown us the way through this crisis."
- AFP