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UK banks received GBP 850 billion support from the HM Treasury during the financial crisis, a report from the National Audit Office showed Friday. The spending watchdog said the public support provided by the Treasury was justified, given the scale of the economic and social costs if one or more major banks had collapsed.
"It is difficult to imagine the scale of the consequences for the economy and society if major banks had been allowed to collapse," said Amyas Morse, head of the NAO. "The Treasury was justified in using taxpayers' money to safeguard savings and stabilize and restore confidence in the financial system."
However, the office said the scale of the loss to the taxpayer will not be known for years to come. The Treasury had estimated in April that there may be a loss to the taxpayer between GBP 20 billion and GBP 50 billion. "Total losses will depend on losses from the Asset Protection Scheme and the price at which the government sells its holdings in RBS and Lloyds."
"The structure of the UK banking system has changed beyond recognition," Morse said. "When it comes to selling its stakes in the banks, the government has to be mindful of the proceeds for the taxpayer but also of the implications for competition in the UK market, so that customers get a fair deal."
By April 2010, the Treasury expects to have spent GBP 107 million on advisers from Credit Suisse and Deutsche Bank, each appointed on retainers for GBP 200,000 a month for a year. The NAO said just under GBP 100 million is expected to be refunded by the banks.
RBS and Lloyds agreed to increase retail mortgage lending and business lending as part of a condition of the recapitalization scheme. RBS would lend an additional GBP 25 billion in 2009-10, and Lloyds an additional GBP 14 billion.
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