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NAO charts bank support progress

15 Dec 10

Year-on update finds taxpayers’ exposure has halved, even as total public investment in banks rises by £7bn

The National Audit Office has published an update to its report “Maintaining the stability of UK banks,” published one year ago to provide a comprehensive summary of the actions taken by the Treasury to support UK banks through the financial crisis.

A year later, the update finds that, although “the taxpayer remains heavily exposed to the banks” there is now more clarity on the scale of these exposures and the likely final cost.

Notably, the total amount of cash invested in the banks has actually risen over the past 12 months, to £124bn. However, the maximum amount taxpayers would need to pay out if government-supported banks, loans and assets were to fail has almost halved, to £512bn.

The ongoing cost to the Government of servicing loans taken out to support the banks stands at £5bn per annum, but has so far been offset by the fees and interest payments received by the Treasury from the various support schemes and loans.

Among its recommendations, the NAO urged the Treasury to keep its eye on the ball, by retaining “a core team of experts on financial stability, with limited turnover of staff, and career structures that allow staff to develop within the area.”

Commenting on the update, the British Bankers Association said: "Banks have made real progress as the NAO update shows. The report shows that, since this time last year, facilities have been halved, the special liquidity scheme is being repaid faster than expected and supported the view that, when the government chooses to sell its shareholding in three banks, the taxpayer will be in the black. We are well aware of the extent of support for the industry during the crisis and we are committed to repaying the public as quickly as possible."

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