UK Banks await clarification on £250 billion unsecured debt guarantee

UK banks, which are planning to participate in the government’s rescue plan for financial institutions, are awaiting clarification on how the temporary underwriting of the issuance of new unsecured debt instruments will affect structured products. The rescue plan, which was announced on Wednesday, states that the government will guarantee short and medium-term debt issued by banks up to 36 months for a fee. The guarantee is expected to be about £250 billion.

“It looks likely that the guarantee will cover issuances of structured products up to three years but we don’t have any idea of the exact parameters of the deal at the moment,” says one banker at an issuer that is expected to partake in the rescue plan. “We don’t know who we can issue the products to, what size the trades can be, and above all we don’t know the fee that will be charged for the guarantee.”

If a bank does decide to issue structured products under the guarantee, the fee paid for