Written question asked by Dai Davies (Independent (affiliation)) on Wednesday, 25 November 2009, in the House of Commons. It was due for an answer on Monday, 30 November 2009. It was answered by Sarah McCarthy-Fry (Labour) on Tuesday, 8 December 2009 on behalf of the Bank of England.

Banks: Government Assistance

Question: To ask the Chancellor of the Exchequer what interest rate was set for repayment of the loan made to (a) RBS and (b) HBOS in October 2008; what guarantees were obtained by the Bank of England as security against each such loan; and whether he discussed those matters with the Governor of the Bank of England prior to the Governor's appearance before the Treasury Committee on 24 November 2009.

Answer: As disclosed by the Governor of the Bank of England in his letter to the Chairman of the Treasury Committee dated 23 November, collateral with a total value of over £100 billion was taken by the Bank as security to support its loans to HBOS and RBS. The assets taken as collateral comprised Government issued debt, residential mortgages, and personal and commercial loans. These assets were of types eligible to be taken in securitised form in the Bank's market wide facilities.From 14 October any additional lending under the facilities was conducted under an indemnity by HM Treasury, which covered the residual risk on the loan after significant collateralisation. At its peak this indemnity covered £18 billion of the support provided.The rate charged to the two banks was a penal rate, broadly equivalent to a cost of funds around 2 per cent. above the equivalent market funding rate.The Chancellor and the Governor of the Bank of England have a regular dialogue on a wide range of financial and economic issues as well as matters relating to emergency liquidity assistance.Information about the Bank's market-wide facilities is available on the Bank's website."http://www.bankofengland.co.uk/markets/marketnotice090925ltr.pdf""http://www.bankofengland.co.uk/markets/marketnotice090925dwf.pdf""http://www.bankofengland.co.uk/markets/marketnotice090925sls.pdf"Details of arrangements between the Bank of England and the two banks are a matter for the Bank of England.

Secondary information