Secret £165bn loan keeping Lloyds alive [roughly $274 billion US]

[FarCenter]

Quite a lot larger than even US assistance to AIG.

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John Waples and Iain Dey

LLOYDS BANKING GROUP is being kept afloat with £165 billion of loans and guarantees from the Bank of England and other central banks around the world, The Sunday Times can reveal.

The bank’s reliance on state funding, detailed in a document released last week in connection with a separate £21 billion fundraising, gives the first insight into the huge scale of aid extended to banks during the financial crisis.

The document says the bank is still “heavily reliant” on government funding. Lloyds also says it would face a “materially higher refinancing risk” if it was not available.

The scale of Lloyds’ dependency has surprised analysts, but they say it shows just how big a financial timebomb it has become. The support is nearly equal to the £175 billion of UK government borrowing to be raised this year, and almost as big as the Bank of England’s £200 billion quantitative easing programme.

The government has extended the money through two funding plans — the Special Liquidity Scheme, which gives loans, and the Credit Guarantee Scheme, under which guarantees are given to allow banks to get commercial loans.

Royal Bank of Scotland is less exposed — it has about £40 billion in state funds. It has cut its dependency on state funding by 69% since the peak of the crisis.

Lloyds inherited most of the government loans from HBOS after it agreed to acquire the bank in September 2008.

Banking sources have revealed that the Bank of England’s Special Liquidity Scheme was created in April 2008 with the express purpose of helping HBOS. The group was heavily exposed to mortgage lending, which dwarfed its retail deposits. When markets deteriorated and HBOS could not recycle its capital, the Bank stepped in.

<snip>http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article6907889.ece