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Secret loans totalling £61.6 billion to two struggling banks were revealed for the first time today.
The colossal sum, equivalent to almost twice the defence budget, was advanced to Royal Bank of Scotland and HBOS in emergency funding in October and November last year.
In return the Bank of England took £100 billion worth of assets as collateral. This morning's disclosure begged the question of how much more taxpayers' money has been secretly lent to prop up embattled banks or financial institutions since the credit crunch began.
Bank of England governor Mervyn King came clean in surprise evidence to the Commons Treasury Committee. He said such loans were made “in exceptional circumstances... to prevent a loss of confidence spreading through the financial system as a whole”.
The loans had bought time for the banks to look for new rescue and funding options and they had since paid them off and had the collateral returned.
He defended the need to keep such operations quiet — even to the point of keeping the details out of the Bank's annual report — on the grounds that disclosure would panic investors and inflict damage on a bank that needed help.
“In most cases, confidence can best be sustained if the bank's support is disclosed only when the conditions that gave rise to potentially systemic disturbances have improved to the point where the disclosure itself should not be a cause of such disturbance,” he told the committee of MPs.
Reader views (24)
£61,000,000,000.00?
Wherever there is a large pot of cash there will be many sticky fingers attached to it.
AND JOE PUBLIC WERE NOT EVEN TOLD ABOUT THE £61,000,000,000.00.
- Reuben Camara, Plot 1, Morecambe Compound, EUSSR, 25/11/2009 08:20
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Wow! so many quotes and yet not a single person has a got a clue what they're talking about. This is how the Bank of England has operated for hundreds of years. They are not risking taxpayers money as they control the amount of money in circulation. These LOANS were secured, yes of course there was a risk that the collateral would be worth less if things went wrong but that would be a lot less than the whole bank going.
- Mark, London, 24/11/2009 23:08
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This government is disastrous. Crash Gordon keeps bailing out private financial companies but what about me with my little company? What about the man in the street?? No money left because he has wasted it over a horrible socialist experiment over the last 10 years which bankrupted us. If a bank goes bankrupt I think that would be better - it is called moral hazard and it would be a lesson for future managers and lousy Treasury supervisory staff.
- Jacqueline, Hampstead, London, 24/11/2009 20:44
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What credence can anyone put on the Bank of England's Annual Report in the future now we know the figures are doctored to hide anything the Governor deems too sensitive? Is the Bank truly independent or was this non-disclosure at the behest of Government? We need a complete clear-out of Parliament, Quangos and senior public(i.e Government)appointees. Even the EU, with which we are being forced to unite without democratic legitimacy, is mired irretrievably in corruption and haughty indifference to its peoples' wishes - not that our UK leaders need any lessons from abroad.
- James Elliott, Eastborne UK, 24/11/2009 19:12
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Either Lloyds board knew of these secret loans to HBOS and failed to disclose them to their shareholders in seeking approval for the takeover, or they were not fully informed by HBOS and the government. Which is correct: either the Lloyds board is guilty of treating its shareholders with contempt, or they were incompetent. They entered the crisis far better than Barclays but, though taking on HBOS at the govt's behest, are now in a vastly worse position.
- David Livermore, London, 24/11/2009 18:30
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I suppose many of these bankers will be standing as Tory candidates at the general election?
- Melvyn Windebank, Canvey Island, Essex, 24/11/2009 18:27
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the cracks in the capitalist wall ever widen and the paper that was hoped to conceal them is ever thinner, as are the hollow words of those that would hope and prey
to reassure the great unwashed that all is grand and will
ever be great.
- M.O'Brien, london.uk, 24/11/2009 17:23
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Is this for the guaranteed bonuses and to 'lend'to the investment banking arms to help their staff reduce their personal tax rates to 18%?
what other business in the REAL world could get away with this theft and public deception?
the total compensation figures for the 'star' traders and deal makers will remain the same......oh and by the way,if it all goes wrong again the idiotic taxpayer will again by asked to bail them out.
I hope the rest of the public realises just how much these guys are poking fun at us
- Anon, london, 24/11/2009 16:36
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Well this tends to confirm what I always suspected. There we were thinking that the Bank of England had been 'nationalised' by the Labour government after WWII. How come they can lend our money without permission or accountability 'in secret'? If the Bank of England remains a private company, may we know its shareholders?
- David Moon, East Sussex, UK, 24/11/2009 16:22
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The public are never told the truth. It happens time and time again. Iraq, the EU, immigration, bunging our money at the banks - what next? It is amazing that we put up with the mediocre standard of government - it really does demonstrate how docile we are.
- Simon Walters, London, 24/11/2009 16:18
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Why can 't the Scots bail out their own banks rather than drag us all down?
- Anglo, Sussex UK, 24/11/2009 16:01
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This does not include, or was this because of the Tungsten /Gold scam that is not being talked about?
- Alspain, manilva Spain, 24/11/2009 15:59
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Lies, lies and just damn deceit.
The dishonesty of this Labour government is beyond disgust. I am so looking forward to reading their election mandate, I could do with a good laugh.
Growth and confidence will not come until we rid ourselves of Labour.
- Frank, Home Counties, England., 24/11/2009 15:43
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Bank of England's secret plans to save SCOTTISH banks and Brown's SCOTTISH banker friends.
They lured a solid English bank (Lloyds) into trouble to hide what they were doing from the public, using their socialist banking friend Victor Blank as a co-conspirator.
This is an abuse of taxpayer money, Lloyds shareholders, and Lloyds employees who are losing their English jobs to save reckless Scottish bankers and their employees.
It is immoral, stinks of a rotten plot, and should be condemned by the media.
- Richard, Hastings, 24/11/2009 15:27
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So it is all right not to disclose this information in case we might panic. How much info is kept back from us to induce us to invest in Banks and other Investments? Fred the Shred walked away with a sizable portion of this "giveaway loan". Can't he see that he has now destroyed all trust in these institutions we regarded as the bed rocks of our Society. The MPs were bad enough though we always suspected but the B of E is a step to far.
The Public need truth and information and the Public can cope and come to its own conclusions with this info.
#How dare they with hold this info.
- Aylyn, Orihuela Costa,, 24/11/2009 15:25
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Hi Bank of England,can I also get a loan from you at zero% interest so I can pay my loan at 18.5% off,thereby taking me out of debt.
- Dave, london, 24/11/2009 15:25
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Did the banks pay interest on these loans?
- Philip, London, England, 24/11/2009 15:23
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Increasingly it becomes clear that full nationalisation is the only answer. Otherwise we will continue to have this time-wasting discussion about nationalising just the losses while privatising profits.
- Jonathan, London, 24/11/2009 14:53
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The incompetence of these banks is staggering.
They are supposedly running a business, but are total failures in every way.
Every member of banking staff should be thankful to the British taxpayer that they have a job.
This lot make the tube and railways look professional and efficient.
A complete disgrace and we will be paying for their greed for many years to come.
- Jim, London, UK, 24/11/2009 14:44
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What's going on here! It bad enough that our hard earned cash is being risked without our consent but worse still without our knowledge. It is 'jaw dropping' to gradually learn by drip feed how the economy has been driven into the ground by 'spivs' aided and abetted by Government and government appointed financiers. Will we ever extricate ourselves from this quagmire.
- John, Leighton Buzzard, 24/11/2009 14:26
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"Honestly Your Honour, I only took the money from my company and didn't tell anyone about it because it may have worried our shareholders and suppliers. I had every intention of putting it back- sometime in the future when things improved".
I work with offenders in London every day and many have either used,or know of someone,who tried this excuse in a court of law. No chance-to us common folk it is called fraud or definitely some form of misleading of investors/shareholders as to the viability of a bank or other company.
Leaving all the other ethical facts aside for a moment;I would not recommend you try this way of using other peoples money in the real world unless you can put up with some sleepless nights.
- Ron Johnson, East London, 24/11/2009 14:17
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Just who and what do nu liebour think they are, this is taxpayers money and they have every right to know how it is being used / abused. It simply doesn't wash to make an announcement after the event and some grubby deal has been done to cover it all up, no doubt with huge rewards for the favoured few, also I for one DEMAND to know what else is being hidden.
- Alan Davey, London Uk, 24/11/2009 14:17
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Monies presumably lent to the banks with government permission, bailed out with further billions of taxpayers money. Senior bankers still collecting millions in bonuses, along with all the rest of the underperformers in the public sector, and after the devastating floods in West Cumbria this week good old Generous Gordon offers two million quid to help those affected by the floods. The vast majority of whom were refused insurance cover for flooding, probably by those self same banks, because, and this is the galling bit, they were 'TOO MUCH OF A RISK' and might harm the bank's profitability. I now believe Einstein was right with e=mc2. I'm obviously in a dierent spacial frame to these jokers.
- Alan, carlisle uk, 24/11/2009 14:04
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"£100 billion worth of assets as collateral"
Undoubtedly this was customer property which was in negative equity and thus not worth the land it was built on. Presumably the banks were also being charged a competitive interest rate based on their credit rating, I'd put it around 15% and upwards if their own lending procedures were anything to go by?
- Bob, Cheam, 24/11/2009 14:01
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