HBOS, RBS were close to collapse, says government

31 December 2008

The government believed that two of Britain's biggest banks, HBOS and the Royal Bank of Scotland (RBS), faced imminent collapse in October unless it supported them with emergency funding, it has been claimed.

According to the BBC's Panorama program, the global credit crunch made if difficult for both institutions to secure short-term capital.
The Bank of England's deputy governor Sir John Gieve said that without £350 billion in loans and guarantees funded by the taxpayers, RBS and HBOS faced going bust.

"There was very little time. The government was announcing the terms on which it was prepared to come in and the banks had to think about it but they broadly had to accept it," he said.

However, Sir John told the program that some of the banks' executives were less-than-enthused about the manner of their rescue, with RBS chief Sir Fred Goodwin describing the deal as "more a drive-by shooting than a negotiation".

The deputy governor had previously admitted that the UK's central bank had underestimated the scale of the economic problems leading up to the credit crisis.

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