Secret £62bn bank loans revealed

24th Nov 2009 11:17

The Bank of England provided emergency funding of £61.6bn to Royal Bank of Scotland and HBOS as the financial system faced meltdown, it was revealed today.Policymakers finally owned up to the huge loans at a parliamentary hearing, having kept the move secret for fear of sparking further panic in equity markets."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," said the central bank. "Having carefully weighed the public interest case for disclosure against the potential systemic consequences, the Bank decided to use its powers to limit the extent of disclosure in its financial statements in the 2009 Annual Report."The loans were made in October and November 2008 and repaid in full by January this year.Lending to HBOS, now part of 43% state-owned Lloyds Banking Group, began on 1 October and peaked at £25.4bn on 13 November. All the money had been paid back by 16 January.RBS's borrowing hit £36.6bn on 17 October after asking for cash on 7 October, but the government-owned bank managed to clear its debt a month later.The BoE said there's no need for the assistance to remain a secret now that RBS has signed up for the government's Asset Protection Scheme and Lloyds is raising £22.5bn from a rights issue and bond swap.Lloyds today priced its world record £13.5bn rights issue at 37p a share, a discount of 59.5% to last night's closing price.The government is taking up its rights as part of the issue, investing £5.7bn net of an underwriting fee, to keep its stake in Lloyds at 43%.Lloyds' massive fundraising exercise means it can avoid being tied into the government's £260bn toxic asset protection scheme. It's already agreed to pay a £2.5bn break fee, having received cover since the scheme was implemented earlier this year.