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Bank officials admit US bailouts ‘better’ than UK’s

Mervyn King
Bank of England governor Mervyn King

Outgoing Bank of England governor Sir Mervyn King has admitted the US has been more successful than the UK in bailing out its banks, as Bank officials warn UK state-backed lenders still require billions of pounds more capital.

The Daily Telegraph reports that in evidence given to the Treasury Select Committee yesterday, Financial Policy Committee member Michael Cohrs said the capital shortfall at Royal Bank of Scotland and Lloyds Banking Group was “a big number”. Bank executive director for financial stability Andy Haldane also said the level of additional capital needed was “material”.

Cohrs also said he did not believe the UK taxpayer will get returns equivalent to the 15 per cent made in the US after its bailouts, and admitted he did not know whether the UK taxpayer stood to make any profit at all from its stakes in UK banks.

Bank governor Mervyn King said: “The sad truth is, in 2008, the idea of focusing efforts on recapitalising the banking system was a UK idea. We got there first but, like many UK ideas, the Americans developed it faster and better.”

The Telegraph reports the US bought stakes in major banks at about half their book value and is already out of most of its positions. The UK paid roughly twice the rate for its stakes in Lloyds and RBS.

Bank officials said Lloyds and RBS may not need more money from the taxpayer to shore up capital as they can consider selling down assets or shrinking their investment banking arms instead.

Lloyds is reportedly considering selling its 60 per cent stake in St James’s Place in a bid to boost capital, while RBS is said to be under pressure to sell off parts of its US operation and reduce the size of its investment bank.

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