Reporting contingent liabilities to Parliament : fifth report of session 2009-10, report, together with formal minutes, oral and written evidence

The Bank of England acted as a 'lender of last resort', extending 'emergency liquidity assistance' (ELA), to RBS and HBOS in the Autumn of 2008.

These operations, underwritten by a Treasury indemnity, were not initially disclosed as it was felt that such disclosure would contribute to a loss of confidence spreading through the financial system as a whole.

Details were disclosed in November 2009 when it was felt that there was no longer the need for secrecy.

The assistance provided by the Treasury was a contingent liability.

Under long-standing arrangements contingent liabilities are required to be reported to the House of Commons by the department which incurred them.

This one had not been and the committee was prompted to inquire further into procedures.

It was acknowledged that not all contingent liabilities can be openly reported or reported ahead of time.

What should happen in these cases, amongst other set rules, is that the minister should inform the chairs of the relevant select committee and the Public Affairs Committee; then inform the Parliament openly if the need for confidentiality lifts. In this report, the Committee finds that the Treasury clearly breached its own well established guidance when it failed to inform the Chairman of this Committee and the Chairman of the Public Affairs Committee of the guarantee.

It is understood why absolute secrecy was considered paramount nonetheless disclosure to the Committee Chairmen could have been done orally.