The scheme became operational at the height of the credit crunch in October 2008 and closed to new issuance on February 28 2010.
Under the scheme the Treasury charges a commercial fee to a bank or building society in exchange for a government guarantee.
The changes to the scheme will allow institutions that have issued guaranteed debt under the scheme to buy back and cancel the debt before the debt was scheduled to mature.
This buy back facility will be subject to certain conditions and the payment to HM Treasury of a cancellation fee.
A bank or building society will continue to pay fees in respect of any non‐cancelled portion of any guaranteed issuance but will no longer be liable for future fees on the portion of the guaranteed issuance that has been cancelled.
However firms will need to pay a cancellation fee of 15% of the total future fees that would have been payable on the cancelled guarantee.
Osborne says the move demonstrates that the UK banking sector is returning to a stable footing and will allow banks to start reducing their reliance on the UK taxpayer, while they return to normal market financing, without government support.
Osborne says: “That the government is able to do this shows that the UK banking sector is clearly on the mend. It is in everyone’s interest that banks return to stability and that as they do they are able to lessen the amount that they depend upon the taxpayer.
“We do though need to go further. The government will push forward with reform to financial services within the UK and make sure that we put in place a stronger and more reliable regulation to ensure that we do not put the taxpayer in this situation again.”