King Reveals “Secret” Loans to RBS, HBOS

The Bank of England said today that it had provided billions in “secret” loans to the Royal Bank of Scotland (RBS) and HBOS, a holding company for the Bank of Scotland. These loans were in addition to the publicly-announced loans extended at the height of the banking crisis. The loans totaled more than £60 billion ($102.7 billion) and were offered through the Emergency Liquidity Assistance program.

According to the Bank of England report, both banks provided collateral for the loans valued at more than £100 billion ($165.7 billion) and also paid fees. The report noted that it believed that it was necessary to provide the loans as the “lender of last resort” to prevent the collapse of the institutions and also decided to keep the actions secret to prevent a repeat of the “bank run” suffered by Northern Rock when its liquidity problems became known.

“In most cases, confidence can best be sustained if the Bank’s support is disclosed only when the conditions that gave rise to potentially systemic disturbance have improved to a point where the disclosure itself should not be a cause of such disturbance.”

– Bank of England Annual Report

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