Outrage over secrecy of £62bn bridging loan given to RBS and HBOS

Thursday 26th November 2009

It has finally come to light that at the height of the banking crisis last autumn, embattled banks RBS and HOS were given emergency bridging loans by the Bank of England, reaching £61.6 billion.

This is in addition to the bailouts of £500 billion that banks received from the taxpayer.

The four-month loans were kept secret as the Bank of England feared disclosing the need for emergency funds would cause a Northern Rock-style run on the banks.

It was added that at the time the whole banking sector was “within hours” of collapse.

Despite keeping the loans secret for so long, Mervyn King assured MPs at the cross-party Treasury Select Committee that the funds had been paid back by January of this year and that the Bank of England had taken over £100 billion of assets as security.

However, the revelation has brought up issues over whether Lloyds TSB shareholders should have been informed of the loan before they agreed to the merger of Lloyds and HBOS.

Vince Cable, the Liberal Democrat Treasury spokesman, said that it was concerning that whilst the Government was pumping billions into HBOS just to keep it afloat it was convincing Lloyds to take it over.

City Minister, Lord Myners defended the decision to keep the loans secret, saying: “Parliament gave the Bank of England the right to operate covertly to support the banking system. We now know that the banking system was within a matter of hours of collapse. We are now seeing how true that was.”