2009 United Kingdom bank rescue package
A second bank rescue package totalling at least £50 billion was announced by the British government on 12 January 2009, as a response to the ongoing global financial crisis. The package was designed to increase the amount of money that banks could lend to businesses and private individuals. This aid comes in two parts: an initial £50 billion being made available to big corporate borrowers, and a second undisclosed amount that forms a form of insurance against banks suffering big losses.
After the October 2008 bailouts of RBS, HBOS and Lloyds TSB together with Lloyds TSB's January 2009 merger with HBOS, the Government was holding a 43% stake in Lloyds Banking Group, but then on 6 March 2009, after it became apparent that the HBOS merger had been bad for Lloyds since HBOS had made losses of £11bn, the Government announced it would increase its stake in Lloyds to 65% (77% if including non-voting preference shares). The investment was maintained at 43% after a rights issue.
RBS had received £5bn in preference shares purchased by the Government who also underwrote a £15bn rights issue, which failed to attract investors, leaving the Government with an investment of £20bn for a 58% stake. The Government, on what became Blue Monday Crash, realising that RBS could not afford the 12% coupon payment on the preference shares, RBS having released financial results showing a loss of £28bn, converted those shares to ordinary shares, increasing its stake to 70%. The investment in RBS has increased to £45bn with a 72% stake held by the British Government.
Recovery of bailout funds
The investment in Lloyds had cost £20.3bn which the British Government began to recover by selling its 43% investment in 2013. Sales continued until the final tranche of 0.5% in May 2017, the Government making a small profit on the sales, realising £21.2bn.
The investment of £45bn has yet to be recovered. the government owns 73% of RBS. A loss may be realised on the bailout cost. The Government has been making large provisions for losses in their public accounts.
- UK Financial Investments Limited
- Asset Protection Agency
- Bank of England - Asset Purchase Facility
- Banking Act 2009
- 2008 United Kingdom bank rescue package
- Wong, Grace (2009-01-19). "U.K. unveils second bank rescue plan". CNN. Archived from the original on 12 February 2009. Retrieved 6 February 2009.
- "FT.com / Companies / Banks - Lloyds in £260bn deal with government". Archived from the original on 2009-08-17. Retrieved 2009-03-08.
- "RBS stake may be sold at a loss, chancellor admits". BBC. 19 April 2017.
- "Lloyds free of taxpayer ownership as ministers sell final shares". Sky News. 16 May 2017.
- "Share sale returns Lloyds to private sector". BBC. 17 May 2017.
- "UK to write down value of RBS stake for second time in 6 months". FT. 17 October 2016.
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