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2009 United Kingdom bank rescue package

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A second bank rescue package totalling at least £50 billion was announced by the British government on 12 January 2009, as a response to the then-ongoing Financial crisis of 2007–2008. The package was designed to increase the amount of money that banks could lend to businesses and private individuals. This aid came in two parts: an initial £50 billion made available to big corporate borrowers,[1] and a second undisclosed amount that formed a form of insurance against banks suffering big losses.

Bailout

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Following the October 2008 bailouts of RBS, HBOS and Lloyds TSB together with Lloyds TSB's January 2009 merger with HBOS, the Government was holding a 43% stake in Lloyds Banking Group, but then on 6 March 2009, after it became apparent that the HBOS merger had been bad for Lloyds since HBOS had made losses of £11bn, the Government announced it would increase its stake in Lloyds to 65% (77% if including non-voting preference shares).[2] The investment was maintained at 43% after a rights issue.

RBS had received £5bn in preference shares purchased by the Government who also underwrote a £15bn rights issue, which failed to attract investors, leaving the Government with an investment of £20bn for a 58% stake. The Government, on what became Blue Monday Crash, realising that RBS could not afford the 12% coupon payment on the preference shares, RBS having released financial results showing a loss of £28bn, converted those shares to ordinary shares, increasing its stake to 70%. The investment in RBS has increased to £45bn with a 72% stake held by the British Government.[3]

Recovery of bailout funds

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  • Lloyds

The investment in Lloyds had cost £20.3bn which the British Government began to recover by selling its 43% investment in 2013. Sales continued until the final tranche of 0.5% in May 2017, the Government making a small profit on the sales,[4] realising £21.2bn.

  • RBS

An investment of £45.977bn was made across three tranches in December 2008 (£14.969bn), April 2009 (£5.508bn) and December 2009 (£25.500bn) at an average investment per share of 502p and represented an 84.4% stake in the company.[5] Since these investments, the bank has paid back the government £305m in underwriting fees, £2.504bn to exit the Asset Protection Scheme, £1.280bn in Contingent Capital Facility fees as well as retiring the special Dividend Access Share for £1.513bn in March 2016. Therefore, the total investment net of all fees and dividends is £40.375bn and represents an investment per share of 440p.

In August 2015, a first tranche of 5.4% of the total issued share capital in the company was sold to institutional investors for £2,079m or £3.30 per share. As at 31 March 2017, this takes the governments overall stake to 71.2%.

The Government has been making large provisions for losses in their public accounts.[6]

In 2018 RBS paid its first dividend since the bailout, the government picking up around £150m on its 62% holding. The government planned to sell £3bn of shares per annum until 2023.[7]

See also

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References

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  1. ^ Wong, Grace (2009-01-19). "U.K. unveils second bank rescue plan". CNN. Archived from the original on 12 February 2009. Retrieved 6 February 2009.
  2. ^ "FT.com / Companies / Banks - Lloyds in £260bn deal with government". Financial Times. 7 March 2009. Archived from the original on 2009-09-12. Retrieved 2009-03-08.
  3. ^ "RBS stake may be sold at a loss, chancellor admits". BBC. 19 April 2017.
  4. ^ "Lloyds free of taxpayer ownership as ministers sell final shares". Sky News. 16 May 2017.
  5. ^ "Equity ownership statistics".
  6. ^ "UK to write down value of RBS stake for second time in 6 months". FT. 17 October 2016.
  7. ^ "RBS pays its first dividend since £45.5bn bailout 10 years ago". The Guardian. 12 October 2018.
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