Banks were close to collapse

LONDON - BRITAIN'S banking system was on the verge of collapse before the government stepped in with a multi billion-pound bailout in the autumn, a government minister was quoted as saying on Saturday.

Financial services minister Paul Myners was quoted by The Times of London as saying that 'we were very close on Friday, Oct 10.'

'There were two or three hours when things felt very bad, nervous and fragile. Major depositors were trying to withdraw - and willing to pay penalties for early withdrawal - from a number of large banks,' he was quoted as saying.

On Oct 13 the government announced a 37 billion-pound (S$75.6 billion) government bailout - the first in a series of emergency measures to shore up banks' balance sheets and unblock the flow of credit to customers.

The measures have had limited success. British bank shares have plunged over the past week amid speculation they will require further help or could even be nationalized.

Official figures released Friday confirmed that Britain is in recession, with output falling 1.5 per cent in the fourth quarter of last year after a 0.6 per cent fall in the third quarter. It was the biggest decline since the early days of Margaret Thatcher's government nearly 30 years ago.

Mr Myners said the greed and mismanagement of some senior bankers had led Britain into its financial crisis. He said many top bankers 'were grossly over-rewarded and did not recognise that.'

'They are people who have no sense of the broader society around them,' he was quoted as saying. 'There is quite a lot of annoyance and much of that is justified.

'Let us be quite clear: there has been mismanagement of our banks.' -- AP

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