UK Government interventions in the financial sector 2007 to 2016

Northern Rock plc takes an emergency loan from the Bank of England

Northern Rock plc asked the Bank of England for an emergency borrowing facility, due to the problems it had borrowing in the money market. The requested loan facilities were provided by the Bank of England. A run on the bank (depositors withdrawing deposits) led to announcement of government guarantee of deposits. As of October 2007, Northern Rock plc was re-classified to the public sector as a public financial corporation.

Bank of England launch Special Liquidity Scheme

The Special Liquidity Scheme (SLS) was introduced in April 2008 to improve the liquidity position of the banking system by allowing banks and building societies to swap their high quality mortgage-backed and other securities for UK Treasury Bills for up to 3 years. The scheme was designed to finance part of the overhang of illiquid assets on banks' balance sheets by exchanging them temporarily for more easily tradable assets.

Loan to Northern Rock plc

The loans to Northern Rock plc initially provided by the Bank of England were transferred to the UK government.

Bradford and Bingley Plc closed as deposit taker

Regulators closed Bradford and Bingley as a deposit taker and the bank was nationalised with the retail deposit businesses and the branch network transferred to Abbey National plc (owned by Grupo Santander). Compensation was made to depositors of Bradford and Bingley on failure of the bank. These compensation payments were principally made by the Financial Services Compensation Scheme (FSCS) with additional funds being provided by HM Treasury to provide compensation above the FSCS ceiling. As of September 2008, Bradford and Bingley was re-classified to the public sector as a public financial corporation.

Royal Bank of Scotland, Lloyds TSB and HBOS classified to public sector as public corporations

The UK government announced a rescue package to recapitalise the Royal Bank of Scotland Group plc, Lloyds TSB Group plc and HBOS plc. Between November 2008 and January 2009, the banks sold preference shares to the UK government, which also underwrote ordinary share issues of these banks. As of October 2008, Royal Bank of Scotland Group plc, Lloyds TSB Group plc and HBOS plc were re-classified to the public sector as public financial corporations.

Credit Guarantee Scheme launched

The UK government launches a scheme, known as the Credit Guarantee Scheme (CGS), to guarantee new short-term and medium-term debt issuance by UK banks and building societies.

Landsbanki (London branch) was declared in default

Fjármálaeftirlitið (FME), Iceland's financial services regulator, took control of Landsbanki Íslands hf. Its London branch froze withdrawals of deposits and was declared in default by the UK Financial Services Authority (FSA) for the purposes of the Financial Services Compensation Scheme (FSCS). The FSCS and UK government paid compensation to eligible UK depositors while negotiations took place with the Icelandic authorities.

Heritable Bank plc was declared in default

Fjármálaeftirlitið (FME), Iceland's financial services regulator, took control of Landsbanki Islands hf. Heritable Bank plc, a UK subsidiary of Landsbanki, was declared in default by the Financial Services Authority (FSA) for the purposes of the Financial Services Compensation Scheme (FSCS). The UK government agreed to protect amounts above the FSCS ceiling. The retail deposits of Heritable Bank plc were transferred to ING Direct.

Kaupthing Singer and Friedlander Limited was declared in default

Fjármálaeftirlitið (FME), Iceland's financial services regulator, took control of Kaupthing banki hf. Kaupthing Singer and Friedlander Limited, a UK subsidiary of Kaupthing, was declared in default by the Financial Services Authority (FSA) for the purposes of the Financial Services Compensation Scheme (FSCS). The UK government agreed to protect amounts above the FSCS ceiling. The retail deposits of Kaupthing Singer and Friedlander Ltd were transferred to ING Direct.

London Scottish Bank was declared in default

London Scottish Bank was declared in default by the Financial Services Authority (FSA) for the purposes of the Financial Services Compensation Scheme (FSCS). The UK government agreed to protect amounts above the FSCS ceiling.

Initial purchase of Royal Bank of Scotland (RBS) shares

The government injected capital into the Royal Bank of Scotland through purchase of equity.

Initial purchase of Lloyds TSB and HBOS shares

The government injected capital into Lloyds TSB and HBOS through purchase of equity.

Creation of Lloyds Banking Group plc

Lloyds Banking Group plc was created on 19 January 2009, following Lloyds TSB Group plc’s acquisition of HBOS plc. As of inception in January 2009, Lloyds Banking Group plc is classified as a public financial corporation.

Bank of England launch Asset Purchase Facility

The Chancellor of the Exchequer authorised the Bank to set up the Bank of England Asset Purchase Fund Facility Ltd (BEAPFF) to buy “high-quality” private sector assets. An indemnity was provided by the UK government to cover any losses arising from the BEAPFF. Initially the aim of the BEAPFF was to improve liquidity in credit markets, but from March 2009 the Monetary Policy Committee (MPC) began also to use the BEAPFF for monetary policy purposes.

Asset Protection Scheme announced

The Asset Protection Scheme was announced by the UK government with the aim of protecting financial institutions against exposure to exceptional future losses on “bad” assets. Lloyds Banking Group (LBG) and Royal Bank of Scotland (RBS) both announced they would join the scheme. Lloyds exited the scheme at the end of 2009 and RBS in October 2012. Lloyds paid £2.5 billion to exit the scheme in December 2009 and in the same month RBS paid fees of £1.4 billion for 2 years’ membership of the scheme. Smaller amounts were paid by RBS in later years.

Dunfermline Building Society was determined in risk of default by regulators

The Financial Services Authority (FSA) determined that Dunfermline Building Society was likely to fail to meet its threshold conditions and the bulk of the business was sold to Nationwide Building Society. As of March 2009, the remaining entity was re-classified to the public sector as a public financial corporation.

Further purchase of Royal Bank of Scotland (RBS) shares

The government injected further capital into the Royal Bank of Scotland through purchase of equity.

Further purchase of Lloyds Banking Group (LBG) shares

The government injected further capital into the Lloyds Banking Group through purchase of equity.

Loan agreement signed with government of Iceland

UK government signed a loan agreement with the Iceland government relating to the repayment of compensation payments made by the UK authorities to UK depositors in failed Icelandic banks.

Further purchase of Royal Bank of Scotland (RBS) shares

The government injected further capital into the Royal Bank of Scotland through purchase of equity.

Further purchase of Lloyds Banking Group (LBG) shares

The government injected further capital into the Lloyds Banking Group through purchase of equity.

Lloyds Banking Group leave Asset Protection Scheme

Lloyds Banking Group (LBG) left the Asset Protection Scheme.

Northern Rock plc capital injection

The UK government injected £1.4 billion in additional capital into Northern Rock plc. This injection was distinct from and additional to the loan facility previously provided to Northern Rock plc.

Split of Northern Rock plc

Northern Rock plc was split into 2 bodies, Northern Rock plc and Northern Rock Asset Management. Northern Rock plc remained an operating financial institution (classified as a public financial corporation) and Northern Rock Asset Management was established as a “financial defeasance structure” closed to new business (classified as a central government body).

Bradford and Bingley classified to central government sector

Bradford and Bingley plc was classified as a “financial defeasance structure” in the central government sector from July 2010.

UK Asset Resolution Ltd established

UK Asset Resolution Ltd was founded as a holding company for Bradford and Bingley and Northern Rock Asset Management.

Special Liquidity Scheme closes

The Bank of England Special Liquidity Scheme (SLS) officially closed at the end of January 2012. The drawdown period for the SLS had closed on 30 January 2009. On closure the accumulated net profits of the scheme were transferred to HM Treasury in April 2012.

Bank of England launch Funding for Lending Scheme (FLS)

The Bank of England and HM Treasury launched the Funding for Lending Scheme (FLS) on 13 July 2012 with the aim to incentivise banks and building societies to boost their lending to UK businesses, in particular small and medium sized enterprises (SMEs).

Credit Guarantee Scheme closes

The Credit Guarantee Scheme (CGS) closed with the final guarantee expiring on 26 October 2012, having been closed to new issuance since February 2010.

Asset Protection Scheme closes

The Asset Protection Scheme closed with the decision by Royal Bank of Scotland (RBS) to no longer participate in the scheme.

Initial sale of Lloyds Banking Group (LBG) shares

The UK government began to sell its stake in the Lloyds Banking Group in September 2013. Prior to September, it had a 39% holding in the company, but this was reduced to 33% after share sales in September.

Contingent Capital Facility closes

The Contingent Capital Facility closed with the withdrawal of Royal Bank of Scotland (RBS) from the facility.

Further sale of Lloyds Banking Group (LBG) shares

The UK government continued to sell its stake in the Lloyds Banking Group, further reducing its holdings to just below 25% in March 2014. As of March 2014, Lloyds Banking Group (LBG) was re-classified to the private sector as a private monetary financial institution.

Further sale of Lloyds Banking Group (LBG) shares

In December 2014, UK Financial Investments Limited (UKFI) announced its intention to sell, over the coming 6 months, more of the government’s shareholding in Lloyds Banking Group (LBG) via a pre-arranged trading plan.

Sale of Royal Bank of Scotland (RBS) shares

In August 2015, the government announced the sale of approximately 5.4% (£2.1 billion) of its shareholding in Royal Bank of Scotland.

Further sale of Lloyds Banking Group (LBG) shares

In December 2015, the government announced that it would extend the Lloyds Banking Group (LBG) trading plan for a further 6 months (ending no later than 30 June 2016). It stated that the current trading plan has reduced the government’s remaining stake in Lloyds to around 9%.

Sale of UKAR assets

In November 2015, UK Asset Resolution (UKAR) announced an agreement to sell £13 billion of assets. The sale concluded in December 2015.

Receipt of final payment from Icesave

In January 2016, HM Treasury announced that UK authorities had recovered all of the £4.5 billion of British taxpayers’ money used to support Icesave deposit holders following the firm’s collapse in 2008.

Monetary Policy Committee economic package

In August 2016, the Monetary Policy Committee (MPC) voted to introduce a package of measures to support the economy.

This package comprised:

• a 25 basis point cut in Bank Rate to 0.25%
• a new Term Funding Scheme (TFS) to reinforce the pass-through of the cut in Bank Rate
• the purchase of up to £10 billion of UK corporate bonds
• an expansion of the asset purchase scheme for UK government bonds of £60 billion

Further sale of Lloyds Banking Group (LBG) shares

In October 2016, the government announced the next phase in their plan to sell the British taxpayers’ remaining £3.6 billion (9.1%) stake in Lloyds Banking Group, with Morgan Stanley International acting as broker (on behalf of HM Treasury) in the execution of the trading plan.