This article was originally published 15 October, 2008
On October 13, 2008, the UK Government announced the details of its Credit Guarantee Scheme (the "Scheme") for approved UK incorporated banks and building societies (including UK subsidiaries of specified foreign institutions). Under the Scheme, an approved institution may apply to have certificates of deposit, commercial paper and/or senior unsecured bonds and notes (collectively, "Securities") guaranteed under a Deed of Guarantee (the "Guarantee") which has been executed by the Commissioners of Her Majesty's Treasury ("HM Treasury"). The Rules of the 2008 Credit Guarantee Scheme (the "Rules"), also published on October 13, 2008,make it clear that the Guarantee may be applied to plain vanilla, non-complex debt securities that mature on or before April 13, 2012 and are issued in standalone transactions or off programmes, that are, in each case, approved prior to issuance by HM Treasury in its sole discretion. The Securities may be denominated in sterling, euro or US dollars. The Guarantee indicates that the Government anticipates assuming guaranteed liabilities in the region of £250,000,000,000, or such higher amount as may be announced at a later date.
Subject in each case to receipt of required HM Treasury approval, the Scheme applies to Securities issued during a six-month period, commencing October 13, 2008 and ending April 13, 2009, subject to extension by HM Treasury. The term of the Securities guaranteed under the Scheme must be no longer than three years. However, within that three year period, rollovers of guaranteed Securities are permitted, subject to the total guaranteed amount not increasing and rollovers being continuous with a maturity date not later than April 13, 2012, on which date the Guarantee will terminate, unless extended by HM Treasury. Neither the Guarantee nor the Rules (nor the related HM Treasury announcement) provide significant guidance with respect to their potential application to specific Securities (or as to what HM Treasury will consider "plain vanilla" and "noncomplex"), although it is clear that an approved institution may not trigger early redemption, either in full or in part, ahead of the scheduled maturity date of the Securities in question.
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