Major British banks may have benefited from an injection of billions of pounds of taxpayer money at the height of the global economic downturn.
That is according to a new report published by the Bank of England (BoE), which has estimated that as much as £220 billion ($345 billion) was provided by the state to the country's largest financiers in 2009 and 2010.
The paper indicates that this "implicit subsidy" caused the nation's financial system to be "distorted" and put its most important banks in a situation whereby they could not fail.
Joseph Noss and Rhiannon Sowerbutts - authors of the report and members of the BoE's financial stability division - noted this additional liquidity on the companies' balance sheets allowed them to outlay money at levels beyond their means.
In addition, the document warned this can lead to the development of a "pernicious spiral", where the implicit guarantee "encourages banks to take more risk, raising the likelihood and cost of bank failure, thus increasing the subsidy".
By Gary Cooper