Financial services

Current exposure to the banking system

The Treasury continues to take an active role in financial stability as banks recover from the financial crisis. This involves monitoring potential sources of economic weakness, and planning and assessing the impact of financial sector reform. Supporting financial stability is a central part of the Treasury’s work, both in the UK and with our European and G20 partners.

As a result of previous Government interventions, the Government continues to have a shareholding in certain UK banks. Its policy is to manage its exposure on an arms-length, commercial basis through the Government-owned company UK Financial Investments (UKFI). While final decisions on selling shares will be taken by the Chancellor of the Exchequer, UKFI is responsible for developing and executing the strategy for the sales of Government shares in Royal Bank of Scotland and Lloyds Banking Group. UKFI has already executed the return of Northern Rock plc to the private sector in January 2012. In addition, UKFI is overseeing the winding-down of the Government’s investment in Northern Rock Asset Management and Bradford & Bingley.

The Office for Budget Responsibility (OBR) is responsible for producing the official estimate of the final net cost to the taxpayer from the interventions to stabilise the financial sector. Their latest estimate, contained in the Autumn Economic and Fiscal Outlook 2011, was an expected net loss to the taxpayer of £25.6 billion. For a comprehensive Q&A on the Government’s exposure to and handling of the banks, please view the following:

Current exposure to the banking system

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