Banks bailout to cost taxpayer £131bn

 

Banks bailout to cost taxpayer £131bn

 

Financial advisers to Treasury – including Credit Suisse – to pocket £107m in fees, National Audit Office report finds

 

Ashley Seager

Fri 4 Dec 2009 00.05 GMT

https://www.theguardian.com/business/2009/dec/04/bailout-bank-national-audit-office-report

 

Total taxpayer support for the stricken banking system will reach £131bn by the end of this year, the National Audit Office says today – and reveals that one investment bank pocketed over £15m in fees for advice during the crisis.

 

The NAO report accepts that the government had little choice other than to prevent the banking system from collapse, but warns that it does not believe the government's targets for bank lending to businesses will be met.

 

The report also acknowledges that actual outlays will be less than £131bn after an expected £14bn is recovered in fees from the state-supported banks.

 

Total public sector support – including borrowing guarantees and liquidity support from the Bank, as well as depositor savings protection – runs to £850bn.

 

Credit Suisse is in line to make £15.4m in fees for emergency advice to the Treasury. The NAO found the total cost of financial advice to government since September 2007 is expected to swell to £107m by next April – higher than thought.

 

The NAO was highly critical of the lengthy contracts offered to advisers and failure to include a definition of "success", although it emphasised that just under £100m of adviser costs will be refunded, largely from part-nationalised Lloyds Banking Group and Royal Bank of Scotland, in return for state backing.

 

"In instances such as this, where criteria for success will be unclear, it is not good practice to enter into such an agreement in the first place or to leave payment solely to the discretion of the procuring authority," said the NAO.

 

It also criticised the government for failing to achieve improvements in bank lending to businesses, despite the billions of pounds of support given to the financial sector. It emerged last night that RBS and Lloyds are unlikely to meet their 2009/10 commitments for £27bn in lending to companies.

 

The shadow financial secretary to the Treasury, Mark Hoban, said: "The government continues to fail to get banks to lend. In order to get the economy going again it is vital that banks lend more to businesses who are struggling to find finance – credit is crucial.

 

"This is why we would not pay out significant cash bonuses this year, diverting the capital instead to support more lending to hard pressed businesses."