2009 United Kingdom bank rescue package facts for kids
In 2009, the British government announced a big plan to help banks. This plan, called a bank rescue package, was worth at least £50 billion. It was created because of a major money problem called the 2007–2008 financial crisis. The main goal was to help banks lend more money to businesses and people.
This help came in two parts. First, £50 billion was made available for big companies to borrow. Second, an unknown amount of money was set aside. This was like an insurance policy to protect banks if they lost a lot of money.
Helping the Banks
After some banks like RBS, HBOS, and Lloyds TSB got help in late 2008, Lloyds TSB and HBOS joined together in January 2009. The government then owned about 43% of the new company, Lloyds Banking Group.
However, by March 2009, it became clear that joining with HBOS had caused big losses for Lloyds. So, the government decided to own an even bigger part of Lloyds, increasing its share to 65%.
RBS also received a lot of help. The government bought £5 billion worth of special shares in RBS. It also promised to buy another £15 billion worth of shares if no one else did. When other investors didn't buy these shares, the government ended up investing £20 billion and owned 58% of RBS.
Later, on a day known as Blue Monday Crash 2009, RBS announced a huge loss of £28 billion. The bank couldn't afford to make certain payments on the special shares the government owned. So, the government changed those special shares into regular shares, increasing its ownership in RBS to 70%. In total, the British government invested £45 billion in RBS and owned 72% of the bank.
Getting the Money Back
The government aimed to get back the money it invested in these banks.
From Lloyds Bank
The government's investment in Lloyds cost £20.3 billion. Starting in 2013, the government began selling its shares in Lloyds. It continued selling until May 2017. In the end, the government made a small profit, getting back £21.2 billion.
From RBS Bank
The government invested a total of £45.977 billion in RBS through different payments between 2008 and 2009. This gave the government about 84.4% ownership of the company.
Since then, RBS has paid back some money to the government in different ways. This included fees for various agreements and buying back some special shares. After all these payments, the government's total investment in RBS was effectively £40.375 billion.
In August 2015, the government sold a small part of its shares in RBS to large investors. This sale brought in £2.079 billion. By March 2017, the government's ownership in RBS was 71.2%.
RBS paid its first dividend (a payment to shareholders) since the bailout in 2018. The government received about £150 million from its shares. The government planned to sell more RBS shares each year until 2023.
More Information
- 2008 United Kingdom bank rescue package
- Banking (Special Provisions) Act 2008
- Asset Protection Agency
- Bank of England - Asset Purchase Facility
- Banking Act 2009
- UK Financial Investments
