ClickAJob News

Chancellor Alistair Darling has warned that the UK is facing an "unparalleled period of financial uncertainty".

His comments come after the head of the world's largest bank resigned due to further losses reported by the institution in the wake of the world's ongoing global credit crunch.

Citigroup chairman and chief executive Charles Prince announced his decision to step down due to losses made as a result of the bank's exposure to bad debts in the US sub-prime mortgage market, with rising default levels in the specialist home-loans sector having prompted the credit squeeze that threatens to hit economies across the world.

Speaking about the situation the chancellor stressed he was confident the UK economy would withstand the global impact of the problems in the US housing market.

"The two things I think you should bear in mind are, the banking system is basically strong, but in addition to that we have a very strong economy with very high levels of people in work," Mr Darling told the Today programme.

The chancellor also defended the government's decision to give troubled British bank Northern Rock "breathing space" to explore its long-term options and rejected claims that taxpayers would be funding the lender to the tune of around £40 billion by the end of the year.

Mr Darling's comments come after Bank of England figures released last week appeared to suggest Northern Rock had borrowed almost £23 billion from the institution to date.

Northern Rock first approached the central bank for an emergency loan in September, prompting the first run on a British bank in almost 150 years and leading the government to guarantee savings held with the lender in order to restore confidence in the banking system.

Mr Darling said the problems faced by Northern Rock and other lenders around the world had occurred due to the amount of money they lend to each other drying up over the summer, a development which occurred due to uncertainty about the extent to which financial institutions are exposed to bad debts in the US sub-prime mortgage sector.

The chancellor said that in future there should be more openness in regard to lending, so that banks were aware of the risks to which they were being exposed.