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Government bank bailout: All but 5 per cent of cost recovered | City & Business | Finance

The NAO said that the level of taxpayer support for the banking sector had fallen over the course of the 2016/17 financial year from £85billion to £58billion, due to a £11.8billion sale of a block of nationalised Bradford & Bingley mortgages to Prudential and BlackRock, as well as the sale of most of the Government’s Lloyds Banking Group shares. 

At March 31, 2017, Royal Bank of Scotland still owed the taxpayer £20billion, down from a peak of £256billion, while B&B still had £30billion of taxpayer support funds outstanding. At the peak of the crisis, it had received £46billion of Government funds. 

The spending watchdog adds that only £7billion of the £60billion bailout that Northern Rock received is still outstanding. 

The NAO’s figures not only take into account the money spent by the Government on stabilising the financial system, but also the cost of the hundreds of billions that it had to borrow to fund the bailouts. 

A source close to the NAO said that Chancellor Phillip Hammond is right to assume that the Treasury will not recoup all of the money it had spent on rescuing RBS, as it is a different, smaller bank to the global operation that was run by disgraced chief executive Fred Goodwin. 

Last Wednesday saw the 10th anniversary of the start of the credit crunch, the global financial crisis that began when French bank BNP Parisbas shut three hedge funds that were exposed to US sub-prime mortgages. 

The funds had been haemorrhaging money and were suffering from a run caused by investor anxiety over the health of the US mortgage market. 

Those fears caused international money markets to start drying up, which in Britain led to the run on Northern Rock in September 2007, the first on a British bank in over 140 years. 

The crisis came to a head in a year later when struggling investment bank Lehman Brothers was refused a bailout by the US government. 

The bank went under and the shockwaves from one of the largest bankruptcies in history plunged the global economy into recession. 

At the peak of the crisis, the Government had provided the UK financial system with £133billion in cash and £1.03 trillion of guarantees to prevent it from collapsing. 

Last week struggling lender Co-operative Bank reported that its first-half losses had narrowed from £177million to £135.2million and that 25,000 customers had closed their current accounts. 

It hopes to complete a £700million rescue debt for equity refinancing with its hedge fund lenders next month. 

On Friday, mutual giant Nationwide said that it had opened 202,000 new current accounts, a rise of 17 per cent during the first quarter. 

Statutory pre-tax profits were down 19.7 per cent to £322million due to the absence of one-off gains from disposals.


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