UK banks may get new bailout

London - The British government is preparing to guarantee billions in assets as part of a new bank bailout plan, media reported on Sunday. The move could see even wider swaths of Britain's partly nationalised banking sector fall under government control.

Reports carried by the British Broadcasting Corp, the Sunday Times and others said the treasury was preparing to underwrite loans made by banks to shore up flagging confidence in the country's financial sector.

The BBC did not cite a figure, but the Times spoke of a "£100bn" being extended to the likes of the Royal Bank of Scotland PLC and Lloyds Banking Group PLC. The Sunday Telegraph said the figure could be as high as £200bn.

Britain's treasury and the central bank did not immediately return calls seeking comment, but a key official from a bank involved in the negotiations told The Associated Press on Sunday that the reports were generally accurate. He spoke on condition of anonymity because he did not want to pre-empt the government announcement.

The plan would reportedly guarantee consumer lending and use taxpayer money to guarantee parts of banks' balance sheets. The BBC said banks would pay a fee to have the government guarantee their so-called "toxic assets," bad debts and risky loans.

Such an insurance plan would be the second time in four months the government has intervened to rescue the banks.

In October, the government took a £37bn stake in its banks - it now owns about 57% of the Royal Bank of Scotland. Lloyds, created in a government-backed merger of Lloyds TSB and HBOS last year, is 43% publicly owned. Two more struggling lenders - Northern Rock, and Bradford and Bingley - have already been nationalised outright.

Barclays PLC, which spurned government cash in the fall, saw its share price crash Friday amid speculation it would have to accept taxpayer help after all. The company announced more than 2 000 new job cuts earlier this week, but the company's board insisted its full year results, to be announced next month, would prove the pessimists wrong.

The Telegraph and Times both said the government was seeking to take bigger stakes in Lloyds and RBS - increasing its share in RBS to 70% and taking majority control of Lloyds, which accounts for half of Britain's savings market and more than a quarter of its mortgages.

Calls placed with both banks were not immediately returned.

It was not clear when the government would make its plan public - the BBC said an announcement was due Monday; other media said it was expected sometime next week. But government ownership of such a huge part of the sector would be mark a change of fortune for Britain's once-proud banks.

One legislator said the process might eventually go even further.

"Maybe at the end of the day we should consider the nationalisation of the whole banking system," John McFall, a lawmaker from Britain's ruling Labour Party, told BBC television on Sunday.

"A few months ago I said were only a hop skip and a jump away from nationalisation," he said. "I think now we're only a jump away."

- AP