UK Taxpayers May Lose $105 Billion On Bank Bailouts
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British taxpayers are unlikely to ever recoup the £66 billion ($105 billion) spent on bailing out the Royal Bank of Scotland and Lloyds Banking Group during the height of the credit crunch back in 2008, warned a group of lawmakers on Thursday, lambasting the U.K. Treasury for a “monumental collective failure” in understanding and reacting to the financial crisis.
British taxpayers are unlikely to ever recoup the £66 billion ($105 billion) spent on bailing out the Royal Bank of Scotland and Lloyds Banking Group during the height of the credit crunch back in 2008, warned a group of lawmakers on Thursday, lambasting the U.K. Treasury for a “monumental collective failure” in understanding and reacting to the financial crisis.
The House of Commons Public Accounts Committee, the spending watchdog for the British parliament, predicted that the government would not be able to sell its stakes in the banks for the price it paid “any time soon;” and labeled the Treasury’s sale of Northern Rock bank in 2011, at a £469 million loss, as “fortunate”.
“There were only two bidders (for Northern Rock),” said Margaret Hodge, chairman of the Commons Public Accounts Committee, as cited by The Independent.
“The Treasury was fortunate that one of them (Virgin Money) had a strategic interest in purchasing a small retail bank at the end of 2011.
[quote]”[As such], the lack of competition does not fill us with confidence that the taxpayer will make a profit on the sale of the two banks which remain in public ownership. There is a risk that the £66 billion invested in RBS and Lloyds may never be recovered,” she said.[/quote]Related: How Can Virgin Money Shake Up the UK’s Banking Sector?
Related: UK Economy: RBS Losses at Record High
Related: Abu Dhabi In Talks To Purchase $16b Stake in RBS
The U.K. government currently owns around 40 percent of Lloyds, and 82 percent of RBS. Although a Treasury aide told the BBC that the government aims “to get the best possible value for taxpayers,” most officials admitted that a sale may not happen “for many years”.
On Friday, the Commons Public Accounts Committee also slammed the Treasury for failing to nationalise Northern Rock quickly enough, whist criticizing the institution for its lack of adequate skills and knowledge.
“The Treasury was part of a monumental collective failure to understand how the pre-crisis boom could lead to a banking crisis,” it said in the report, as cited by AFP. “The Treasury lacked the skills to understand Northern Rock. It took too long to nationalise the bank and failed to make an effective challenge to the bank’s business plan, first after nationalisation in 2008 and again in 2009 when deciding what to do with the bank.”
[quote]”[But] the Treasury has started to address this lack of capacity: it has established UK Financial Investments (UKFI) with a small team of 12 people to manage the taxpayer shares in banks, and has conducted a review of its own skills and capacity. But huge challenges remain,” the report conceded.[/quote]Related: Who Watches The Financial Watchdogs In The UK?
Related: Infographic: Biggest Bailouts of the 21st Century
