SNAP ANALYSIS - Devil in the details in bank rescue plan

LONDON (Reuters) - The nation's second bank rescue package, unveiled on Monday, is unlikely to produce immediate results and its impact will only be measured by a slow drip of changes in market prices and credit in the months ahead.

Shares in the country's biggest banks slumped further after the plan was outlined on Monday, and analysts said the government's programme as yet did not provide enough details to convince markets of its chances of success.

"For last October's package, the test of success was relatively clear: would the banks close?" said Michael Saunders, economist at Citigroup.

"For these measures, it may be a far more nebulous mix of credit spreads, surveys and anecdotal evidence of credit availability, asset prices and so forth. Conditions may remain unclear for a while."

Below are the key planks of the latest scheme and an assessment of what they'll need to succeed:

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.

While markets saw this as a welcome step, the 50 billion pounds is only equivalent to 2 percent of bank lending compared to a 10 percentage point slowdown in lending last year.

"The asset protection scheme was long on intentions, short on details, meaning the impact is impossible to gauge and won't come in for a number of months," said Alan Clarke, UK economist at BNP Paribas.

* INSURANCE SCHEME

Banks will have to identify their riskiest assets which they can then insure against future losses with the government for a fee.

This should boost confidence in banks' balance sheets but problems still remain as to how risky assets will be valued. Nor is it clear how big the scheme will be.

* 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.

Such guarantees can distort normal market processes, allowing bad risks to get funding.

* GUARANTEE FOR ASSET BACKED SECURITIES

Drawing on recommendations from a report for the government by James Crosby, the former head of leading mortgage lender HBOS, 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.

While this may help unfreeze mortgage markets, it does once again distort the market and finding a way out can be difficult if the mortgage-backed asset market does not recover.

"Significant questions surround this scheme, notably how the Debt Management Office plans to include an auction process in the scheme, the first of which is timetabled for April," said Philip Shaw, chief economist at Investec.

Amit Kara of UBS said: "This is an important step forward, but it remains to be seen how much appetite there is for asset backed securities per se."

* 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.

This will not kick-start lending on its own and analysts say the fees for the using the Discount Window are steep for lower grade collateral.

(Reporting by Sumeet Desai)