European governments on Monday pledged a total of €1,873bn ($2,546) as part of co-ordinated plans to shore up their financial sectors, sparking sharp rallies across the continent’s stock markets. In the largest such plan, closely modelled on last week’s UK initiative, Germany said it would issue up to €400bn in credit guarantees for inter-bank lending and set aside a €100bn fund to inject capital in financial institutions and acquire illiquid assets. France meanwhile said it would guarantee up to €320bn in inter-bank loans and provide €40bn in new capital for banks. Christine Lagarde, French finance minister, said French banks should use the funds to raise their Tier one capital ratios to 9%, so they are on “a level playing field” with UK banks. The Netherlands, Spain, Italy, Austria, Portugal and Norway joined the effort, committing a total of €501bn in guarantees and capital, while the UK said it would provide £37bn ($64bn) in new capital to three of its largest banks, as part of its already announced £400bn bail-out plan. The Fed announced it would make unlimited amounts of dollar funds available offshore to be distributed by the ECB, Bank of England and the Swiss National Bank. More detail on Germany’s rescue plan here.

This entry was posted by Gwen Robinson on Tuesday, October 14th, 2008 at 5:36 and is filed under Capital markets. Edit this entry.