Banks came “close to collapse” as short term funding faded

Banks came “close to collapse” as short term funding faded



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It has been revealed that in the second week of October, banking giants HBOS and the Royal Bank of Scotland came close to folding as short term funding dried up. 

It was this crisis that led to the Government granting them additional capital in the form of £350 billion in taxpayer loans and guarantees, according to the BBC’s Panorama.

 

Explaining the bank rescue, the deputy governor of the Bank of England, Sir John Gieve said: “There was very little time. The government was announcing the terms on which it was prepared to come in and the banks had to think about it but they broadly had to accept it.”

 

HBOS and Lloyds TSB are expected to receive £17 billion of taxpayer money, with the main bulk of the sum going to HBOS.

 

Royal Bank of Scotland benefited from £20 billion; however taxpayers now own a 58% stake in the bank.

 

Sir John Gieve also revealed that upon hearing the terms of the Government bailout, former Royal Bank of Scotland boss, Sir Fred Goodwin stated: “You know it’s more a drive-by shooting than a negotiation.”

 

Sir Fred Goodwin was forced to apologise to shareholders last month for the bank’s failure under his direction.

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