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The day the bill arrived

• Robert Peston
• 29 Sep 08, 02:30 PM

Since the onset of the credit crunch in August of last year, there have been bad days, worse days and today.

What a horrible coincidence of accidents and emergency resuscitations we've seen.

Here they are, in no particular order.

1) The , set to cost our cash-strapped banks at least 拢9bn over the coming years (see my notes of this morning).
2) The , a continental bank rather bigger on one measure than the Belgian economy, of 拢9bn of Benelux taxpayers' cash.
3) The - the huge battered US retail bank - by Citigroup, a bank which has had capital-deficiency problems of its own.
4) A massive penny dropping on Wall Street, the recognition that to be injected into banks to keep them alive.

It's the day when no-one could be under any illusion about the costs of rebuilding our structurally impaired financial system.

That cost will fall directly on taxpayers and on banks.

Indirectly it will hurt businesses - some of which are already being starved of vital capital by banks' inability to lend.

And for millions of people in the US and Europe, there's the double blow of an erosion in the value of their wealth (through declining property prices and the falling value of long term savings in pension funds) and of an increased risk of redundancy.

Or to put it another way, for most of us, there's little in the way of shelter from the storm.

Don't forget that last week we had a massive injection of one-week loans into the banking system by the Federal Reserve and Europe's troika of leading central banks. And in the UK, the Bank of England auctioned 拢40bn of three-month loans.

That was supposed to calm nerves and reduce the price of money for banks.

But the cost for banks of borrowing from each for three months in sterling, euros or dollars has risen again.

Banks are as worried as they've ever been about the credit-worthiness of their peers. Trust and confidence are almost extinct qualities.

Share prices too are falling hard - which in part is a belated recognition that the crisis in money markets will have an impact on the prospects for most companies.

If economic growth was going to be slow before the events of the past three weeks, it's going to be a lot worse now.

And if you wish to know which economies are perceived by global investors to be most flawed and vulnerable, you could do worse than look at the price of insuring sovereign debt in the market.

Those CDS prices tell you that Austria, Belgium, Denmark, Finland, France, Germany, Sweden, and the Netherlands are all perceived to be more credit-worthy - to be in a better position to service their national debt - than either the US or the UK.

PS. Silly me. In my list of financial firms in receipt of massive first aid, I forgot to mention Germany's Hypo Real Estate, the commercial property lender, which has received a whopping 拢28bn in credit guarantees from the German government in collaboration with a consortium of banks.

Oh, and Iceland's third largest bank, Glitnir, has been nationalised.

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B&B collapse to cost City 拢9bn

• Robert Peston
• 29 Sep 08, 11:14 AM

Best estimates by officials at the Financial Services Compensation Scheme is that the collapse of Bradford & Bingley will cost our banks up to 拢7bn, in respect of what they'll ultimately have to pay into the Scheme to make good future losses at the nationalised bank.

Although that won't be payable till 2011, there will be interest costs for the banks on the loan being made by the Treasury to cover what's owed to B&B's retail depositors.

Those interest costs will begin with a payment of 拢450m next September, which will represent about six months of interest. The interest will then be payable annually on whatever balance is drawn down.

The total aggregate interest costs will be well over a billion pounds over the life of the loan, probably nearer to 拢2bn or even 拢3bn (I may be understating this cost - it all depends on how quickly the loan is repaid from the run-off of B&B's mortgage book).

So the costs to our banks of the collapse of Bradford & Bingley are likely to be somewhere in the region of 拢9bn to 拢10bn - a colossal cost to the City for the sins of B&B.

What's more, those costs will fall disproportionately on our biggest banks, namely Royal Bank of Scotland, HSBC, Santander, Lloyds TSB and Barclays - because contributions to the are divvied up on a pro rata basis, measured by share of insured deposits (in other words, banks which take in more cash from retail savers and depositors pay more to the Scheme).

All of which begs a big question: why on earth didn't those big banks club together to rescue B&B rather than let it collapse and be nationalised.

Surely that would have been cheaper for them.

Their apparent inability to act collectively for their common good is not altogether encouraging.

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City pays for Bradford & Bingley

• Robert Peston
• 29 Sep 08, 08:15 AM

The most politically explosive aspect of 's nationalisation is how much risk of losses is being .

The answer, surprisingly, is not much.

Because the bulk of any future losses will be born first by shareholders and providers of what's called subordinated debt

And after that losses - up to a staggering 拢14bn - would fall on the banking industry.

For taxpayers to lose a penny Bradford and Bingley's future losses would have to be unthinkably huge.

The reason taxpayers are protected is that on Saturday the board of the ruled that B&B was unable to pass the test of being a viable bank, and therefore a claim was triggered on the insurance scheme for bank depositors, the .

That claim would amount to 拢14bn and is a liability of the banking industry

However the has decided instead to lend 拢20bn so that depositors won't lose a penny.

And will only demand repayment from the other banks of any portion of that 拢20bn that isn't covered by the liquidation of Bradford & Bingley's loan book over the coming few years.

Not all of B&B's loans and assets are available to meet this claim. There are about 拢25bn available, to repay the 拢20bn (the rest of B&B's mortgages are pledged to holders of covered bonds and asset-backed securities).

But there is one immediate cost for the banking industry - it will pay the 拢450m interest cost of the Treasury's 拢20bn loan.

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