2008 United Kingdom bank rescue package

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In the period September 2007 to December 2009, during the Global Financial Crisis, the UK government intervened financially to support the UK banking sector, and four UK banks in particular.

At its peak, the cash cost of these interventions was £137 billion, paid to the banks in the form of loans and new capital. Most of this outlay has been recouped over the years. As at October 2021, the UK Office for Budget Responsibility reported the cost of these interventions as £33 billion, comprising a loss of £35.5 billion on the NatWest (formerly Royal Bank of Scotland) rescue, offset by some net gains elsewhere.^[1]

The first public indication of the crisis was in February 2007, when HSBC issued its first-ever profit warning as a result of losses incurred by its U.S. consumer finance arm.^[2] Later that year, in July 2007, two Bear Stearns hedge funds became insolvent.^[3] There followed a series of global events that led to the seizure of interbank credit markets. The UK retail bank Northern Rock, which relied heavily on short term funding, sought emergency assistance from the Bank of England. When this arrangement was publicised, the bank experienced the first run on a British bank in 150 years. In news reported around the world, customers of the bank were shown queuing outside branches to withdraw their deposits. In an effort to stop the panic, on 17 September 2007, the then UK Chancellor of the Exchequer, Alistair Darling, announced the government would guarantee all Northern Rock deposits.

From September 2007 to December 2009, the UK Government made further interventions to support the banking sector, and specifically to RBS (now NatWest), Lloyds Banking Group (LBG), Bradford & Bingley as well as Northern Rock. Northern Rock and Bradford & Bingley were both taken into full public ownership; RBS was taken into majority public ownership; and the government took a minority stake in LBG.^[4]

In addition to cash support, the UK government enacted a number of other schemes involving financial guarantees with the aim of restoring confidence in the banking sector. These were contingent liabilities that did not involve cash outlays. The National Audit Office (NAO) estimated that total guarantees added up to over £1 trillion at peak support. As these guarantees were gradually withdrawn or expired, the outstanding sum under guarantee stood at £14 billion as at 31 March 2018.^[4]

Subsequently, broadly similar measures were introduced by the United States and the European Union in response to the financial crisis.^[5][6][7]