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Bank of England bailed out RBS and HBOS

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The Bank of England extended secret emergency financing to Royal Bank of Scotland and to what was then HBOS during the banking panic last October, indicating the two banks were even closer to collapse than had been thought.

From the beginning of October 2008 when Ireland guaranteed the liabilities of all its banks, HBOS needed life support, with RBS also seeking emergency lending on 8 October.

By mid-month, the emergency liquidity assistance for the two peaked at £61.6bn, indicating that insolvency would have followed had the Bank not acted. The two banks clearly could not meet their obligations.

”This was a dire emergency,” said Paul Tucker, deputy governor of the Bank, giving evidence to the Treasury Select Committee on Tuesday.

The emergency aid came at a time when both banks were already eligible for a variety of measures aimed at providing liquidity to the entire banking sector, suggesting that even those extraordinary measures were not enough to sustain either lender.

Read the article at FT!

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