Maintaining financial stability of UK banks: update on the support schemes, thirty-second report of session 2010-12, report, together with formal minutes, oral and written evidence
The Stationery Office, Apr 20, 2011 - Business & Economics - 38 pages
This report examines the progress on repaying taxpayer support and maintenance of financial stability following action taken in the 2007 crisis in the financial markets. Action included nationalisation, the purchase of a large number of shares in RBS and Lloyds, establishing sector-wide schemes to guarantee banks' debt-funding and protect their assets, and indemnifying the Bank of England against losses for providing temporary liquidity. The level of explicit support has gone down from nearly £1 trillion to £512 billion, and estimates of the size of the implicit subsidy vary - from as high as £100 billion to just below £10 billion in 2009 alone. The explicit subsidy includes the fees paid by banks for their use of the Credit Guarantee Scheme which, to date, have been at least £1 billion less than the benefit received by the banks. These subsidies enable private gains to be made at the expense of public risk, and some of these gains have been used to pay bonuses to staff and dividends to shareholders, rather than enhancing the financial sustainability of the sector. This causes the Committee and the wider public much concern. For the taxpayer to obtain value for money from exiting from the support depends heavily on a successful sale of the shares in RBS and Lloyds. The government shareholding is far greater than in previous share sales and will require extraordinarily careful handling to protect the taxpayers' interest. Regulatory and political uncertainty over the banking sector will remain until the Government has responded to the recommendations from the Independent Commission on Banking.
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100 billion 2011 Home Office Alistair Darling Andrew Bailey Asset Protection hearing Asset Protection Scheme audit Austin Mitchell balance sheet Bank of England banking sector Banking Support banking system Bob Diamond bonuses Bradford & Bingley C&AG's Report Chair Chancellor Chris Heaton-Harris Commission on Banking competition cost credit guarantee scheme decisions dividend economy EFSM Eurozone February 2011 Home financial services going Government hearing of 16 HM Treasury Ian Swales implicit subsidy interventions investors Ireland Joseph Johnson look Maintaining financial stability Matthew Hancock Northern Rock Offering including retail profit RBS and Lloyds remuneration risk Scholar Secondary Offering including share price shareholding shares in RBS Sir Nicholas Macpherson Special Liquidity Scheme stability of UK Stella Creasy Stephen Barclay Support and Asset support schemes taxpayer support Tom Scholar Treasury and Bank UK banks UK Financial Investments UKFI value for money wholesale funding