Taxpayers may never recoup bank bailout money

| November 16, 2012 | 0 Comments
Taxpayers may never recoup bank bailout money

UK taxpayers may never recover the £66bn spent by the government to bailout RBS and Lloyds Banking Group during the financial crisis, a parliamentary committee has warned.

The government bought 40 per cent of Lloyds and 82 per cent of RBS in 2008, when the banks were at risk of collapse.

Earlier that year it nationalised Northern Rock when the subprime mortgage crisis started to emerge.

Reporting on the sale of Northern Rock to Virgin Money, the Public Accounts Committee commented that it could be “many years” before Lloyds and RBS could be sold.

The Committee said that the government was fortunate that Virgin Money was so keen to buy Northern Rock and warned that market conditions are less favourable now than they were then.

Taxpayers could lose £2 billion on Northern Rock’s sale, which had to be completed by 2013 under EU regulations, although the loss could be lower if the government manages to sell the Northern Rock assets excluded from the Virgin Money deal.

There were just two bidders for Northern Rock, and the committee suggested that that the lack of competition meant that the best price was not secured.

In its report, the committee said: “The Treasury was fortunate that one of them had a strategic interest in purchasing a small retail bank at the end of 2011.”

“The low level of competition does not give us confidence that the taxpayer will make a profit on the sale of RBS or Lloyds,” it added.

The committee criticised the way the sale of Northern Rock was handled and suggested that UK Financial Investments (UKFI) lacks the ability to successfully sell the RBS and Lloyds’ stakes.

UKFI, which has just 12 staff, manages the government’s stakes in RBS and Lloyds.

Meanwhile, RBS has appointed investment bank UBS to manage the sale of 316 branches after Santander withdrew its bid for the branches last month.

The branches must be sold by December 2013 under European competition rules.

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