There is every likelihood of yet another banking scandal and it seems that yet another piece of the banking jigsaw has fallen into place. This particular piece indicates that at least two banks were near-bankrupt at the end of 2008. Not just “in trouble” but BUST.
The Bank of England extended secret emergency financing to Royal Bank of Scotland and to HBOS during the banking panic last September and October – without telling the taxpayer or shareholders. Lloyds shareholders were being asked to approve the takeover of HBOS. Yet they were not told about the multi-billion cash bailout of HBOS.
From the beginning of October 2008 when the Irish Government guaranteed the liabilities of all its banks, HBOS needed life support, with RBS also seeking emergency lending on 8 October. There was a certain amount of scoffing at the Irish when the secret handouts were being made by the Bank of England.
By mid-month, the emergency liquidity assistance for the two peaked at £61.6 billion , indicating that insolvency would have followed had the Bank of England not acted. The two banks clearly could not meet their obligations.
“This was a dire emergency,” said Paul Tucker, deputy governor of the Bank of England, giving evidence to the Treasury Select Committee.
These loans were in addition to the measures which provided liquidity to the entire banking sector, suggesting that even those measures were not enough to sustain either bank.
In addition, both banks had access to the Bank of England’s special liquidity scheme under which banks could swap mortgage-backed securities for government gilts.
The obvious question to ask is how many more secret deals have been made between the Treasury, Bank of England and the banking industry.
You may recall that in 2007, the Bank of of England provided secret finance to Northern Rock.
So what has happened to transparency within the financial sector – or is it a case some being more transparent than others?












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