THE Bank of England today slashed interest rates by 0.5% as Chancellor Alistair Darling announced a £50billion emergency rescue plan for UK banks.

THE Bank of England today slashed interest rates by 0.5% as Chancellor Alistair Darling announced a £50billion emergency rescue plan for UK banks.

The Chancellor's scheme will see taxpayers' money used to buy stakes in major banks in an attempt to halt the meltdown in the financial sector.

The half-point cut was followed by banks around the world in response to the global financial turmoil.

It's the first such move since the aftermath of the 9/11 terror attacks in November 2001.

The developments followed yesterday's panic on the stock market, with banks suffering devastating share losses.

Royal Bank of Scotland shares had plummeted 39% to a 15-year low, wiping around £10bn off the value of the business, while HBoS was down 42%.

But after this morning's announcement, banking stocks made strong gains on the London market.

Royal Bank of Scotland rose 12% while HBoS was 40% higher after Lloyds TSB said its proposed acquisition of the mortgage lender remained on track.

But other banks were down as investors awaited further details on the sector's exposure to the rescue plan.

A report this morning also suggested RBS had agreed a boardroom clear-out in return for the state-assisted boost.

It was claimed the bank's chief executive Sir Fred Goodwin and chairman Sir Tom McKillop had agreed to stand down, but the bank denied the report.

Mr Darling also said it was "absolutely not" true they would lose their jobs as part of a deal.

"It is not the Government's business to deal with banks' appointments," he said. "It is entirely a matter for banks."

Mr Darling said the bail-out measures the Government was taking were in response to "extraordinary times".

"Those are critical so far as the system is concerned and we want to make sure we can get the system going again," he said.

"It is a process that inevitably will take time. It is not an instant change, but it is a restructuring, it is stabilising the system."

HBoS, which is in the process of being taken over by Lloyds TSB, said it welcomed the announcement.

"It represents a very real and serious intention on the part of the authorities, following consultation with the banking industry, to bring stability and certainty to the UK banking system.

"HBoS believes this initiative is very much in the interests of its shareholders and customers."

First Minister Alex Salmond, an ex-economist, also welcomed the plan.

"It's substantial - very substantial," he said.

"For the first time we have seen action to open up medium-term funding, which has been one of the missing links in the previous attempts to help the situation. So that's welcome."

But Mr Salmond said more needs to be done.

He added: "I still think more assurance will be needed for depositors."

The Chancellor said the taxpayer would not lose out.

"The taxpayers' interest is being protected," he said.

"I'm very clear that in return for all this, the taxpayer has got to see some upside. In relation to lending to small businesses, in relation to mortgages ... that's important too."

Mr Darling said he still did not "rule anything out" but, of today's package, he added: "I believe it will go a long way."

He added that he would be announcing measures in the Commons later to help British depositors in Icesave - the internet arm of the Icelandic Landsbanki bank, which was nationalised yesterday.

Shadow Chancellor George Osborne said the Tories would be "as constructive as possible" and added: "We want this to work, we hope it will work."

SELL OFF: HBoS sells Aussie bank

HALIFAX Bank of Scotland has agreed to sell its Australian banking business for £1.2billion in a bid to boost its balance sheet.

It said the sale of Bank of Western Australia Ltd and St Andrew's Australia Pty Ltd would "further enhance the group's capital position and reduce the group's wholesale funding requirements".

The retail, business banking, insurance and wealth management businesses will be sold to Commonwealth Bank of Australia subject to approval by Australian regulators.

HBoS was, until recently, considered the UK's banking giant, but is set to be taken over by Lloyds TSB after pre-tax profits for the six months to the end of June plummeted 72% to £848million.

ICELAND: Savers face nervy wait

AROUND 300,000 UK savers with Icelandic internet bank Icesave face an anxious wait to find out what will happen to their money.

City watchdog, the Financial Services Authority, warned yesterday that it expected the Icelandic authorities "to put the group's parent company Landsbanki into insolvency proceedings".

Such a move would trigger payouts to savers from the UK's and Iceland's depositor protection schemes.

But people are likely to face a long wait for their cash - and those with more than £50,000 could potentially lose out.

Payouts are complicated by the fact that the Icelandic scheme would pay around £16,000, with the Financial Services Compensation Scheme topping up the rest.

ABBEY: Fixed rate loans go up

Abbey has announced it is raising the cost of its two and three-year fixed rate mortgages by up to 0.15%.

Abbey blamed the move on decisions by its competitors to up their rates, with Halifax, Nationwide and Lloyds TSB's mortgage arm Cheltenham & Gloucester all raising their rates in the past week.

The change, which comes into force from tomorrow, will leave a two-year fixed rate mortgage for someone with a 25% deposit who pays arrangement fees of £549 at 6.04%.

An increase of 0.15% adds around £14 to monthly repayments on a typical £150,000 mortgage, or £168 a year.

The Bank of England is widely expected to cut its base interest rate tomorrow.

Union calls for bank bosses to be sacked

A LEADING trade union called today for "heads to roll" - including the sacking of bankers - as a result of the crisis which led to the extraordinary Government intervention.

They want bosses to pay with their jobs after claiming workers were not prepared to see bankers, at the level of Royal Bank of Scotland chief executive Sir Fred Goodwin, receive huge bonuses paid for by the taxpayer, while public sector staff pay rises have been kept below the rate of inflation.

Giving millions of public sector workers, including nurses and teachers, a pay rise to keep pace with inflation would have cost just £1.5 billion - a fraction of today's bail-out, said general secretary Paul Kenny.

He added: "Business as usual is now over for the City elite that organised this disaster.

"They will have to get used to living on normal incomes and paying their taxes now that the taxpayer is propping them up and calling the tune as a result."

Mr Kenny said the Government had no alternative but to bail out the banks to keep the financial sector afloat but he added: "The old saying now applies with a vengeance - he who pays the piper, calls the tune.

"GMB members who are paying the piper want to see swift action to ensure that the bankers responsible for the crisis are held accountable and dealt with. GMB members will want to see bankers' heads roll."

The GMB was highly critical of the role of Barclays Bank in organising a huge loan to a private equity firm which took over the AA motoring organisation.

John Cridland, deputy director general of the country's biggest business group the CBI, said the Government's announcement would herald the first step on the road to financial recovery.

Labour MP John McDonnell said: "Yet again, the taxpayer is being asked to pay for the mistakes of the bankers with next to nothing in return.

"I believe the Government should nationalise to stabilise the banks and must place conditions, including representation on the boards, no repossession of homes and a pay cap for bank directors with an end of bonus binges.

"Without these conditions the bail-out is nothing but a subsidy by the taxpayer to the very people who have brought our economy to the brink of collapse."