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UK Government bank rescues: financial consequences

Published Friday, December 1, 2017

This Paper gives some basic numbers concerning the government's net expenditure on banks rescued during the financial crisis of 2008-9 and the debts owed to it by other organisations.

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This Paper gives some basic numbers concerning the government’s net expenditure on banks rescued during the financial crisis of 2008-9 and the debts owed to it by other organisations. 

The really large sums invested by government were spent recapitalising HBOS, Lloyds Banking Group and the Royal Bank of Scotland and establishing the vehicle to hold ownership of Northern Rock and Bradford & Bingley.  The then Chancellor, Alistair Darling, initiated recapitalisation measures of up to £17 billion for Lloyds and HBOS and £20 billion for RBS.

All of the shares in Lloyds have been sold back to the market; government continues to own a substantial portion of RBS.

The question – how much did the rescue cost? – cannot be answered for certain.  The investment in Lloyds produced a ‘profit’ and it is likely that the government will have a positive return on at least some of its other assets.  Against that, it looks unlikely that the investment in RBS will be positive.

In June 2015 the Chancellor announced that the Government would start the process of selling its stake in RBS however, this process was halted due to market volatility and has yet to restart.

Substantial assets of the other rescued banks have been sold to financial investors and the good parts of some banks are now part of other banks. 

There is a descriptive timeline of events from 2007 to 2015 produced by the ONS available here.

 

Commons Briefing papers SN05748

Author: Tim Edmonds

Topic: Financial services

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