UK Lawmaker: Disturbed Over Non Disclosure Of Secret Loans To RBS And HBOS

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The British Parliament expect it to be notified about the indemnity provided to the central bank at the time of granting, Chairman of the Committee of Public Accounts, Edward Leigh said in a reply to the letter from Chancellor of the Exchequer.

The Treasury had granted indemnity to the central bank against losses that it might suffer in providing emergency support to RBS and HBOS in October 2008. This matter was disclosed to the Treasury Committee this week. The Bank of England revealed that it provided more than GBP 60 billion support to those two banks last year. RBS paid back the money by December 16 and HBOS by January 16.

Leigh said, "In circumstances where the existence of an indemnity needs to be kept confidential, the rules specify that such notification should be made to the Chair of PAC and the Chair of the relevant Select Committee." "In practice under these rules, I and former Chairs of my Committee have been notified of indemnities and other liabilities on a confidential basis and none of us have breached the trust placed in us," added Leigh.

"I am greatly disturbed that the decision was taken to by-pass the rules in this case and would appreciate a full explanation from you," Leigh said. Further, he said, "I would like to know whether in your view this was the earliest opportunity for these matters to be brought into the open."

In a letter to Treasury Select Committee dated November 23, Alistair Darling said at the time of granting indemnity in 2008, the central bank assessed that any disclosure or leak of the operations would seriously jeopardize the financial stability of the system as a whole. He added that the risk to public resources was low, given the quality of the collateral received by the BoE.

Darling told the House of Commons that it is the policy of the BoE that such assistance should be disclosed once the central bank considers that the need for confidentiality has ceased. Next week, the National Audit Office is set to publish its definitive account of the banking crisis, including the support measures taken.

The British Parliament expect it to be notified about the indemnity provided to the central bank at the time of granting, Chairman of the Committee of Public Accounts, Edward Leigh said in a reply to the letter from Chancellor of the Exchequer. (Market News Provided by RTTNews)