Royal Bank of Scotland (RBS) and HBOS: Verge of Collapse

Royal Bank of Scotland (RBS) and HBOS (LON:HBOS) were close to collapse in the second week in October, due to the British banking giants having difficulty getting short-term funding as the credit crunch swept around the world, according to the BBC program Panorama.

The authorities had said without the funding that both RBS and HBOS would have collapsed. Both banks were forced to raise additional capital by getting guarantees and loans from the government.

The Bank of England and Treasury injected £350 billion in loans and guarantees into banks to shore up the banking system, this move by the authorities preventing RBS and HBOS from collapsing.

Sir John Gieve, the deputy Governor of the Bank of England said that there was very little time, the banks had to think about it but they broadly had to accept the government bailout. Sir John Gieve also noted that Sir Fred Goodwin Royal Bank of Scotland chief had said that the offer was “more of a drive by shooting than a negotiation”.

Source: BBC

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