FTSE falls 2.6 percent

By Dominic Lau

LONDON (Reuters) - The top share index slid 2.6 percent by midday on Wednesday as recession fears stemming from a credit crisis battered commodity stocks, but Royal Bank of Scotland and HBOS rebounded on news of a UK rescue plan.

By 11:46 a.m., the FTSE 100 was down 119 points at 4,486.2, after falling to 4,245.3 to touch a five-year low earlier in the session. It is down 32 percent for the year.

HBOS and RBS leapt after falling 40 percent in the previous session, supported by a government plan to inject up to 50 billion pounds into the ailing banking sector.

HBOS soared nearly 52 percent, also boosted by relief that its acquisition by Lloyds TBS was on course, traders said, while RBS surged 26 percent.

Under the bank rescue plan at least 200 billion pounds will be made available to UK banks under a special liquidity scheme, and banks will increase their total Tier 1 capital by 25 billion pounds.

The government will also provide an incremental minimum of 25 billion pounds of further support for all eligible institutions, in the form of preference shares, PIBS or as assistance to an ordinary equity fund-raising.

But the rest of the sector remained under pressure, with Barclays, Lloyds TSB, HSBC and Standard Chartered losing between 1.2 and 11.8 percent.

The FTSE 350 banks index lost 1.9 percent.