Britain could lose the £66 billion ($105 billion, €2 billion) it spent on rescuing Royal Bank of Scotland and Lloyds Banking Group and made key errors over failed lender Northern Rock, lawmakers said on Friday.
The Public Accounts Committee - a panel of British lawmakers - issued
the gloomy verdict in a eagerly-awaited report into the government's handling of Northern Rock, which has since been taken over by Richard Branson's Virgin Group.
At the height of the credit crunch in 2008, Britain's then-Labour government was forced to nationalise Northern Rock and pump billions of taxpayers' cash into Royal Bank of Scotland (RBS) and Lloyds Banking Group (LBG).
"The £66 billion cash spent purchasing shares in RBS and Lloyds may never be recovered, and the Treasury must also ensure it is prepared to deal with any future crisis, whatever form it may take, when it emerges," the committee warned on Friday. Taxpayers still own 81% of RBS and 39.6% of LBG following the enormously expensive bailouts.
The committee meanwhile slammed the Treasury over its slow reaction to the banking crisis. "The Treasury was part of a monumental collective failure to understand how the pre-crisis boom could lead to a banking crisis," it said in the report.
In September 2007, Northern Rock was plunged into turmoil when its exposure to the global credit crunch forced it to seek emergency assistance from the Bank of England.
The lender was nationalised in February 2008. After a long period of uncertainty, the current Conservative-Liberal Democrat government last year decided to split Northern Rock in two, forming a "good bank" for its healthy businesses and a "bad bank" management firm to wind down toxic assets. Earlier this year, the Treasury sold the "good" bank - Northern Rock plc - to Branson's Virgin Money for £747 million.
Lawmakers added on Friday that authorities had failed to nationalise Northern Rock quickly enough, and had failed to challenge its business plan.