UK Bank Crisis Costs The Defence Budget

There are so many releases by the Government and the banks today that it is hard to find the numbers behind the obscure statements and discussions of hybrid capital structures.

There is a reason for this, there is much to hide for both sides. Yesterday C@W pointed out that the current policy is the incorrect solution to the problem, today I have done a very preliminary skim of the numbers to come up with some fag packet costings:

Total investment in Royal Bank Of Scotland (RBS.L) - £25 billion. At some point in the future the bank will be sold off again, I would expect most if not all of this money to be recovered in time. However in the meantime it is an interest free loan for 5 years. So in effect, costing the taxpayers 2-3% per annum. So if it is 5 years before it is all repaid, then it will cost between £1 to 2 billion irrecoverable.

RBS Asset Protection - The treasury is expecting to make a £25 billion loss on this and the cost of insurance is £6.5 billion.

LLoyds (LLOY.L) Investment similar to RBS, although half the money, so another billion. No asset protection to stop the company going bust though - a real longer term concern as they also released interim results which are very complacent.

Then there is the Northern Rock mess, as I have said before, it looks like a £3 billion loss at least.
So overall, a £30 billion loss will be shouldered by the taxpayers and this is on a reasonable expectation that the smaller banks of the future are saleable.

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