Darling and Osborne clash on secret loans
A row broke out yesterday in the House of Commons after chancellor Alistair Darling and FSA boss Hector Sants defended the decision to keep secret the £61.6bn of emergency loans handed by the Bank of England to RBS and HBOS last year at the peak of the financial crisis.
The loan facilities – £36.6bn for RBS and £25.4bn for HBOS – were granted in October 2008 and repaid in January.
Darling argued that the government had been correct to keep the loans secret because the banking system was close to meltdown. He said that any disclosure could have lead to a loss of confidence and caused a run on the banks.
But shadow chancellor George Osborne criticised the secrecy of the loans, and said Lloyds TSB shareholders had been mislead because they did not know the central bank was propping up HBOS when they were asked to approve Lloyds TSB’s takeover of the firm.
The head of City watchdog the FSA Hector Sants pointed to documents made public before the merger that he said made it “abundantly clear” that HBOS would have been insolvent without central bank funding.