LONDON - Britain announced yesterday a second rescue plan for the country's ailing banks, hoping to thaw frozen lending by offering to insure banks against large-scale losses on bad assets they already hold.
Stock investors, however, were spooked by fears that the second bank-rescue plan in three months was a step toward full nationalization of one or more banks.
Fears focused on the Royal Bank of Scotland Group P.L.C., which disclosed yesterday that it was likely to report a record full-year loss. In the United States, Royal Bank is the parent of Citizens Bank of Pennsylvania.
Its shares closed down 67 percent in London trading.
"There is a great deal of uncertainty. There seems to be some concern . . . that the group will be totally nationalized sometime in the near future," said Keith Bowman, at Hargreaves Lansdown Stockbrokers Ltd., speaking of the British banking industry.
RBS said its losses for the full year could be as much as $41.3 billion, which would be the biggest loss ever by a British corporation.
Prime Minister Gordon Brown said yesterday that the government had increased its stake in RBS to almost 70 percent, but he declined to say whether he believed the bank will eventually be fully nationalized.
The government took a stake under a first round of bailouts late last year.
Brown said the government now would offer to insure banks against default on toxic loans in exchange for a fee and legally binding commitments to make credit more available to businesses and home buyers.