Banks got £45bn subsidy because they're too big to fail

Britain's biggest banks benefited from an implicit subsidy worth nearly £45bn last year because they are too big too fail, according to new figures published ahead of the final Vickers Commission report on banking reform next week.

Building on previous research from the Bank of England, the New Economics Foundation (NEF) think-tank said the biggest banks were able to borrow money at lower interest rates because of the implicit understanding "that the Government will step in" if they fall into trouble.

This advantage was worth a total of nearly £45bn for Barclays, Royal Bank of Scotland, Lloyds and HSBC, according to the NEF's calculations. Although lower than during the credit crunch, the NEF said the size of the combined subsidy underscored the case for reform, adding that the Vickers Commission's interim report did not go far enough in addressing the advantage.