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MPs slam Treasury secrecy over £18bn to cover BofE loans

The public accounts committee has slammed the Treasury for failing to notify Parliament of an £18bn indemnity covering emergency loans provided by the Bank of England to RBS and HBOS.

In a report on maintaining financial stability in the banking system, published today, the committee says the Treasury authorised the Bank of England to provide emergency liquidity assistance to HBOS and RBS in October 2008.

It indemnified the Bank against potential losses, but did not inform Parliament of the support until November 2009.

Committee of public accounts chairman Edward Leigh says: “To those of us who attach the highest importance to adhering to Parliamentary procedure, it was of significant constitutional importance that the Chancellor failed for 13 months to notify Parliament of an £18bn indemnity his department had granted to the Bank of England, against potential losses in providing emergency support to RBS and HBOS.”

The committee also hit out at the Treasury for paying “success fees” to investment banking advisers where no success criteria could be specified and for paying costly retainers to firms.

The committee states: “The Treasury made extensive use of external advisers, including financial and legal advisers. The Treasury expects to spend £107m on advisers, although all but £7m is likely to be charged back to the banks.

“Two investment banks, Credit Suisse and Deutsche Bank, were appointed, initially on retainers of £200,000 a month for a year. These appointments also included the potential payment of success fees of up to £5.8m, but the contracts did not define success, instead leaving payments to the sole discretion of the Treasury.”

The Committee is now calling for the Bank of England to be audited by the National Audit Office.

It says: “Despite the enormous amounts of taxpayers’ money at stake the National Audit Office has not been able to examine directly the actions of the Financial Services Authority and the Bank of England.

“We welcome the recent announcement that the National Audit Office will shortly be appointed as auditor of the Financial Services Authority, but this leaves the Bank of England as the only member of the tripartite authorities not audited by the National Audit Office.”

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  1. Sorry, but why should the Treasury tell Parliament anything? We live in a secretive society were the MPs are still covering up their expense claims; footballers can spend fortunes trying to keep their misdemeanours quite; and nobody takes responsibility for anything.
    And why should the FSA declare anything – there is nothing in their covering legislation that requires disclosure at any level. And they do not abide by any code of conduct that bares relation to the norms of a Western Society.
    Parliament, as currently structured, is a eunuch – it can make as much noise as it wants but has power to do nothing except keep 646 people off the dole queue.
    Are Parliament going to do anything about this non-disclosure other than make a noise? Could they do anything is they wanted to? Would they have the balls to do anything if they wanted to? I think all answers are in the negative.
    So what’s the point?
    The whole process is encapsulated in a quote by Charles Peters: Bureaucrats write memoranda both because they appear to be busy when they are writing and because the memos, once written, immediately become proof that they were busy.
    The annoying thing is that they get paid with our money.

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