UK banks may need another state bailout next year: Study

UK finance minister George Osborne yesterday dismissed a think tank report that British banks may need another state bailout next year, with their borrowing requirements likely at £25 billion a month.

According to the independent New Economics Foundation (NEF) think tank, which said in a report on Britain's banks Where Did Our Money Go? that it had examined Bank of England data and reached the conclusion that many UK banks appeared to face a funding bottleneck.

Royal Bank of Scotland and Lloyds had to be part-nationalised as they incurred huge losses in the credit crisis, and others, such as Barclays and HSBC, have benefited from cheap credit provided by the central bank, the report said.

UK banks, have till January 2012 to repay £185 billion they borrowed from the Bank of England against £287 billion pounds in illiquid assets, mostly residential mortgage backed securities, under the BoE's Special Liquidity Scheme.

They are also under pressure from new Basel III banking industry rules, that will come into effect in January 2019, requiring banks to hold more capital. Meanwhile, yesterday Switzerland laid out tough new requirements for Credit Suisse and UBS.

When asked about the NEF report yesterday, Osborne said he was not expecting any British bank to need any further government support.