The Bank of England secretly lent more than £60bn to the Royal Bank of Scotland and HBOS to prevent them from falling at the height of the financial crisis, it has emerged.
In evidence to the Treasury select committee, officials from the Bank revealed that the two banks came within minutes of ceasing normal business operations before being offered £61.6bn in emergency funds.
According to the bank, use of the facilities peaked at £36.6bn for RBS on 17 October and at £25.4bn for HBOS on 13 November. The RBS facility was repaid by 16 December and the HBOS facility by 16 January this year.
Paul Tucker, the Bank's deputy governor, told the committee: "If we hadn't have done it, the [economic] cycle would have been a lot worse ...This was a dire emergency."
In return for funding, the two banks provided the Bank with collateral in the form of residential mortgages, personal and commercial loans and gilts valued at £100bn.
The banks and the authorities decided to keep the operation secret for fear it would threaten the stability of the system.
Michael Fallon, the deputy chairman of the select committee, said he was "outraged" by the delay in disclosure. He conceded that secrecy was needed for a "few days" but said there was no reason to keep the loans secret for a year.
Analysts said that Tuesday's disclosure could be seen as a sign the Bank believed the financial system had returned to stability.
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