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Will the banks be bailed out again if they go out of business?

Such was the level of bank bailouts following the financial crash of 2007/2008 that it is difficult to see such levels of government financial support happening again. The UK government bailed out RBS and Lloyds bank, part nationalising them in the process. The Chancellor at the time, Alistair Darling, made £200 billion available via a liquidity fund.

The RBS bailout cost the UK government £45 billion

The government bailed out Lloyds with £20.3 billion initially, reclaiming £21.2 billion eventually following a sale of shares in 2017. However, the £45 billion with which the government bought 73% of RBS may not be recovered and the state has been making provisions for such losses in their public accounts. The government is currently said to be sitting on a loss of £26 billion but has still said it will seek to sell its stake by 2019 regardless.

Last year an article in The Guardian said “the reported losses hide the true extent of the problems inside the Edinburgh-based bank, because they have been offset by the cash RBS has continued to generate since its £45 billion rescue. The total cost of disastrous lending, over-paying for takeovers, fines and legal bills actually tops £90 billion.”

Such is the public temper against banks that such measures in the future would undoubtedly be unpopular. However, if account holders’ assets are at risk the state may feel it has no option but to underwrite peoples savings by keeping a bad bank afloat with a bailout. Therefore, future bailouts cannot be discounted.