British government spills its “secret”

The Royal Bank of Scotland and HBOS, Britain’s largest mortgage lender, were secretly kept afloat with £62 billion ($109 billion) in emergency government support through the Bank of England at the height of the credit crisis last year, the Times of London reports. The bank contends it was dealing with “exceptional circumstances” and acted as “lender of last resort.” Today’s disclosure was made only after the government “judged calm had been restored and there was no longer any need for secrecy.” Both banks eventually provided the bank with collateral with a value in excess of $175 billion. They were also charged fees by the bank. The revelation is destined to spark controversy— and to intensify complaints from HBOS’ and Lloyds of Londons’ shareholders that they were not given the full picture when they were offered shares in earlier rights issues by the two banks in January. The Financial Services Authority is already investigating HBOS for alleged lapses in disclosure.

Times of London