Government provides billions to shore up banks

By Sumeet Desai and Jodie Ginsberg

LONDON (Reuters) - The government pumped 50 billion pounds of taxpayers' money into its banks on Wednesday, seeking to revive Europe's top financial centre and help allay an economic storm threatening industry and jobs around the world.

"We have led the world today with a proposal to restructure our banking system," Prime Minister Gordon Brown said after emergency overnight talks with banking chiefs. "We are taking the steps that I believe that other countries will take in the future."

The talks followed a day of dramatic falls on Tuesday in the shares of British banks, threatened by a global collapse in confidence between banks that has led to a freezing up of lending, the lifeblood of the economy at large.

Just days after the U.S. approved a $700 billion (399 billion pound) package to rescue its crisis-hit financial system, Britain said it would buy new preference shares or similar instruments, guarantee up to 250 billion pounds to help banks refinance debt, and make at least 200 billion pounds of liquidity available to the market.

The bank support plan was announced just hours ahead of a co-ordinated 0.5 percentage point cut in key interest rates around the world led by the U.S. Federal Reserve.

German deputy Finance Minister Joerg Asmussen said the move would help financial stability in Europe. "It contributes to the stability of the British financial system and we know what importance that has for the European financial system," he said.

Some British banks have lost nearly half their value on the stock market amid investor fears they could collapse if they were not handed a massive liquidity lifeline.

STOCKS FALL