FACTBOX - Key points of second bank rescue plan

LONDON (Reuters) - The government unveiled a second bank rescue package on Monday in an effort to get lending flowing again in an economy lurching into its first recession since the early 1990s.

Below are some key features of the plan.

INSURANCE SCHEME

* Banks will have to identify their riskiest assets which they can then insure against future losses with the government for a fee. They will still be liable for initial losses but could at least put in a ceiling, hence boosting confidence.

Each institution will be expected to retain a further exposure of around 10 percent above the first loss. Banks will need to ring-fence the assets and will also be expected to commit to support lending into the economy in return for participation in the scheme.

The government will hold talks with the banks and examine their assets to come to an agreement on what will be charged for the insurance. This is expected to take several weeks.

CREDIT GUARANTEE EXTENSION

* An extension of the window for the Credit Guarantee Scheme to December 31 from Apr. 9. Under this, the state guarantees debt issued by banks that were recapitalised by the government last year. The final maturity date of Apr. 9, 2014 remains in place.

All other aspects of the scheme remain the same.

GUARANTEE FOR ASSET BACKED SECURITIES

* Drawing on recommendations from the Crosby report, this new facility will start in April and will give full or partial guarantees to eligible high quality asset backed securities, including mortgages, corporate and consumer debt.

Any bank or building society eligible to take part in the Credit Guarantee Scheme will be allowed to participate in this further guarantee plan.

The scheme is subject to European Union state aid clearance.

NORTHERN ROCK

* Northern Rock, the mortgage lender nationalised last year, will no longer be actively reducing its existing mortgage book.

BANK OF ENGLAND LIQUIDITY FACILITY

* After the closure this month of the Special Liquidity Scheme, which allows financial institutions to swap their hard-to-trade assets for more liquid ones, the BoE will extend its Discount Window facility to one year from 30 days for an incremental fee of 25 basis points.

The Discount Window was launched in October to provide liquidity insurance to the banking system. Banks and building societies can borrow government bonds for a set period against a wide range of collateral for a variable fee.

BANK OF ENGLAND ASSET PURCHASE FACILITY

* The BoE will, from Feb 2. and with Treasury authorisation, be able to buy high quality, private sector assets such as corporate bonds, commercial paper and syndicated loans with an initial fund of 50 billion pounds.

The BoE will be indemnified by the Treasury.

The operation will not boost the money supply and will be financed by Treasury bills.

QUANTITATIVE EASING

* The BoE's asset purchase facility also lays out a framework for the Monetary Policy Committee to use asset purchases for monetary policy purposes should it see fit.

This extension will allow the MPC to boost the money supply and could come into play if interest rates -- currently at 1.5 percent -- near zero.

The Governor of the BoE Mervyn King and finance minister Alistair Darling will exchange letters on this framework later this month. King is due to give a speech in Nottingham on Tuesday.

PREFERENCE SHARES

* The government will also swap its preference shares in RBS worth 5 billion pounds for ordinary shares, aiming to remove pressure on the bank to pay 12 percent annual interest. That could see Britain increase its stake in the lender to near 70 percent from 58 percent.

In return, RBS has agreed to increase its lending into the economy by 6 billion pounds over the next year and to include large corporates in the existing agreement to maintain lending at 2007 levels over the next three years.

CAPITAL REGULATION

* The Financial Services Authority confirmed that banks taking part in the rescue package must have a minimum core tier one capital ratio of 4 percent.

(Reporting by Sumeet Desai and Matt Falloon; editing by Kate Kelland, Ron Askew)