Bank of England reveals £61.1bn spent propping up RBS and HBOS

Published 24th Nov 2009

Mervyn King tells Treasury select committee of emergency loans issued at the height of the financial crisis


The Bank of England today revealed for the first time that it spent £61.6bn propping up RBS and HBOS in the height of the global financial crisis last autumn.

Governor Mervyn King detailed the emergency loans, which it made in its role as "lender of last resort" in a submission to the Treasury select committee.

Addressing the committee's hearing on the Bank's inflation report this morning, King spoke of the dramatic events of the past year in financial markets and the "extraordinary" responses required from the Bank.

He told the committee: "I have sent a letter to you to explain more fully one aspect of the Bank's operations that was prompted by those events: lending facilities that we put in place at the height of the crisis for two individual institutions that we are now able to disclose." King said that the loans to HBOS and RBS, which were fully extended in October 2008, were fully repaid – one in December 2008 and the other in January 2009.

John McFall MP, chairman of the committee, said: "My colleagues when we received this note there was a little bit of intake of breath thinking how many universities, how many colleges, how many jobs could you support with this."

The two banks put up collateral worth more than £100bn in return for the loans as the financial system was rocked by the failure of Lehman Brothers.

The combined borrowings of both banks – which were charged a fee for the facilities – peaked on 17 October last year, the Bank said. The fee was 1.7 percentage points over the usual lending rate.

The Bank said use of the emergency facilities peaked at £36.6bn for RBS, on 17 October 2008, and at £25.4bn for HBOS, on 13 December 2008. RBS repaid the cash by 16 December 2008, and HBOS by 16 January 2009.

The collateral provided by the two banks included residential mortgages, personal and commercial loans and UK government issued debt with a total value in excess of £100bn.

Both banks also had access to the Bank of England's normal market operations and to other facilities including the Special Liquidity Scheme.

Source: ' Guardian '

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