Brown urges banks to come clean

London - Prime Minister Gordon Brown told British banks on Saturday they must own up to the extent of their bad assets amid more reports his government could launch a fresh bailout of the struggling sector.

In a Financial Times interview, Brown did not rule out the possibility that banks could get a further injection of taxpayers' money after big names including Royal Bank of Scotland (RBS) were bailed out last year in a £37bn recapitalisation.

His comments came after shares in RBS and Barclays plunged Friday after US giant Citigroup announced an $8.29bn fourth quarter loss and Bank of America got a $20bn state bailout.

"One of the necessary elements for the next stage is for people to have a clear understanding that bad assets have been written off," Brown told the Financial Times.

"We have got to be clear that where we have got clearly bad assets, I expect them to be dealt with."

Officials are reportedly working on plans to buy banks' bad assets - exacerbated by some consumers and businesses' inability to pay their debts as the credit crunch bites - and place them in a "bad bank", or to underwrite the toxic assets.

The BBC said the government would next week announce an insurance scheme which would allow banks to pay a fee and have their bad loans underwritten by the taxpayer up to a point.

The industry reportedly has some £200bn of bad assets.

Brown's government is expected to unveil a series of corporate lending guarantees next week to free up activity in areas including housing and car finance, the FT said.

"It's the same problem of access to the banks and to funding," Brown told the paper. "Obviously, the sooner the corporate bond market moves more effectively, the better."

A spokesperson for the Treasury said: "We have been working with the banks for the past couple of weeks. We will be making an announcement on additional measures soon."

Ahead of the G20 summit which will be in London in April, Brown also warned against a retreat into "financial isolationism".

Speaking to reporters later on Saturday, he stressed the need for international cooperation to revive the credit markets, adding he had been in talks with world leaders.

"It is the exposure of British banks to international losses that is the biggest problem that we face," Brown said. "So what we need is an international solution."

- AFP