Bank of England reveals secret loans to RBS, HBOS

 Wednesday, November 25, 2009
LONDON: The Bank of England admitted Tuesday that it lent a total of 61.6 billion pounds to Royal Bank of Scotland and HBOS in secret during last year’s financial crisis, adding that the cash had been repaid.

The British central bank revealed the loans, equivalent to 68 billion euros or 102 billion dollars, in a statement to coincide with governor Mervyn King’s appearance before a Treasury Select Committee hearing.

The BoE said that in autumn 2008 it had the offered emergency lending facility to Royal Bank of Scotland and HBOS, which is now part of Lloyds Banking Group. The bank said the loans could now be revealed because it judged that there was no longer a risk of a “potentially systemic disturbance” to the financial system.

“Now that RBS has signed up for the asset protection scheme and Lloyds has embarked on its alternative strategy for capital raising, the bank judges that there is no longer a need for the assistance to remain secret,” the BoE said.

RBS borrowed a maximum of 36.6 billion pounds on October 17, 2008, and HBOS borrowed a maximum of 25.4 billion pounds on November 13, 2008. The groups subsequently repaid the cash in December and January respectively.

Struggling HBOS was bought by rival Lloyds TSB in a government-brokered deal that created Lloyds Banking Group earlier this year. However, LBG fell under state control as a result of the global financial crisis and is now 43-percent owned by the taxpayer.

Royal Bank of Scotland was also ravaged by the credit crunch and the takeover of Dutch giant ABN Amro at the top of the market in 2007. The state now owns 84 percent of RBS after an enormous bailout.

Northern Rock was meanwhile nationalised in February 2008 after it ran into severe funding problems because of the global credit crunch.