The Treasury, which authorised the BoE to provide emergency assistance to HBOS and RBS in October 2008 and indemnified the Bank against potential losses, did not inform Parliament of the support until November 2009.
The report said that the Chancellor of the Exchequer decided, given the sensitivity of the situation in October 2008, to disclose the information about the emergency support to as few people as possible to reduce the risk of leaks.
In a report on maintaining financial stability in the banking system, the committee said it was normal practice for the Parliament to be informed beforehand if a Government department proposes to incur a contingent liability.
However, the Treasury disagreed saying that the procedures for departments to notify Parliament of contingent liabilities provide an important constitutional safeguard.
In the Treasury’s view, these had been exceptional circumstances involving market information of particular sensitivity.
In its conclusions, the Committe explained: “There can be no excuse for flouting Parliamentary procedure. It is unacceptable that the Treasury did not notify us of an £18 billion indemnity covering part of the emergency liquidity assistance provided by the Bank of England to RBS and HBOS. In future, and only in very exceptional circumstances, when highly sensitive matters need to be disclosed, as a minimum we expect departments to provide the Chairman of this Committee with a full oral briefing.”
