In the report "Maintaining Financial Stability Across the United Kingdom's Banking System ("HC 91")" the National Audit Office has concluded that the public support provided to UK banks by the Treasury was justified, given the scale of the economic and social costs if one or more major banks had collapsed. In providing that support, moreover, the Treasury met two of the Government's principal objectives: protecting depositor's money in banks and maintaining the stability of the financial system. The final cost to the taxpayer will not, however, be known for a number of years. The total amount of support the Government provided to the banks reached GBP 850 billion. In consequence there have been no disorderly failures of UK banks and no retail depositor in a bank operating in the UK has lost money. By the end of November 2009, the banking sector as a whole had benefited from improved confidence. But, in 2009-2010, lending to businesses is not likely to meet targets. The Treasury estimated in April 2009 that there may be a loss to the taxpayer of between GBP 20 billion and GBP 50 billion, the wide range reflecting the inevitable uncertainty involved in such an estimate. Total losses will depend on losses from the Asset Protection Scheme and the price at which the government sells its holdings in RBS and Lloyds. The Treasury expects by April 2010 to have spent GBP 107 million on advisers, some of whom had to be employed at short notice. In total, just under GBP 100 million is expected to be refunded by the banks. Two sets of financial advisers - from Credit Suisse and Deutsche Bank respectively - were each appointed on retainers of GBP 200,000 a month for a year. Their contracts included provisions for success fees of up to GBP 5.8 million, payable at the Treasury's discretion. As a condition of the recapitalisation scheme, RBS and Lloyds agreed to targets for retail mortgage lending and business lending: RBS would lend an additional GBP 25 billion in 2009-10, and Lloyds an additional GBP 14 billion. To date, both banks are on track to meet their retail mortgage lending commitments but lending to businesses is likely to fall short of the targets. The Treasury is monitoring progress and meets each of the banks regularly. The only formal sanction available if targets are not met is a potential refusal to extend guarantees for wholesale borrowing under the Credit Guarantee Scheme.
Number of pages: 48
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