FACTBOX-Europe scrambles to shore up bank sector

Mon Oct 6, 2008 8:19am EDT

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Oct 6 (Reuters) - European governments have followed Germany's lead in offering deposit guarantees to savers in a frantic effort to calm fears among investors over the worst financial crisis in 80 years.

Following is a breakdown of the key measures national governments have announced:

GERMANY Germany said it was considering a nationwide "umbrella" to shield its banking sector from market turmoil, a reversal in policy which underscored growing government concerns.

A day after Berlin pushed through a weekend rescue for German lender Hypo Real Estate HRXG.DE and announced a federal guarantee of over 500 billion euros ($679.5 billion) in private bank deposits, German Finance Minister Peer Steinbrueck said a "Plan B" for the domestic financial sector was under discussion.

German Chancellor Angela Merkel wants those responsible for the financial crisis to help solve it, her spokesman said.

ICELAND

Iceland's government scrambled to avert a fully-fledged market meltdown, with the banking minister saying the drafting of a plan to help the financial system was "well under way".

Iceland, hoping to bring home desperately needed foreign currency, has asked pension funds to repatriate cash. It has already been forced to rescue one bank -- Glitnir GLB.IC.

BRITAIN

Britain promised to protect ordinary savers but said it was seeking details on Germany's plan before taking action. Prime Minister Gordon Brown will speak to Merkel by telephone later in the day.

British bank shares fell sharply amid fears the government would seek partial ownership in return for support.

Finance Minister Alistair Darling will update parliament later on Monday after saying on Sunday that he was "looking at some pretty big steps".

IRELAND

Last week, the Irish government unveiled the first such plan, which guarantees the deposits and debts of six Irish-owned banks for the next two years, following a panic-stricken day for Irish financial stocks. It was quickly passed into Irish law.

Ireland's central bank chief said decisive action was needed to protect the stability of the economy and the financial system. But the scheme has already triggered inflows of cash from neighbouring Britain into Irish banks, angering many there who say the move is anti-competitive.

EUROPEAN COMMISSION

German plans for a guarantee on retail bank deposits seem less liable to give rise to distortions of competition than any scheme covering a wider spectrum of savings, the European Commission said on Monday.

On the Irish measures, the Commission said it was looking closely at their scope as they go beyond retail deposits.

SPAIN

Spain is prepared to unilaterally guarantee bank deposits if European Union leaders fail to come up with a common plan on shoring up the banking system, Economy Minister Pedro Solbes said.

SWEDEN

The Swedish central bank said it would increase the amount of loans offered to the Nordic country's banks in order to ensure credit supply which has been hit by the international financial crisis. The amount offered in an auction of three-month loans on Monday would be raised to 100 billion crowns ($14.26 billion) from an originally planned 60 billion. In addition, 100 billion in six-month loans would be offered on Wednesday, the bank said.

DENMARK

The Danish government early on Monday guaranteed all bank deposits in Denmark as part of a deal with banks to set up a 35 billion Danish crown ($6.50 billion) liquidation fund. Until now, deposits in Danish banks had been guaranteed up to 300,000 crowns.

ASIA

The Bank of Japan offered to lend 1 trillion yen ($9.68 billion) against pooled collateral in an auction to inject liquidity into the market.

South Korea said it would dip into the world's sixth-largest foreign exchange reserves to help with loans.

Bankers in Pakistan called for urgent central bank action to stop the liquidity crunch putting banks in jeopardy as overnight call rates closed between 25 and 28 percent.

Vietnam said it had withdrawn funds from overseas banks and deposited them in Singapore and Hong Kong to reduce exposure to the crisis.

(Editing by Ron Askew)

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