The Bank of England disclosed on Tuesday that it provided almost 62 billion pounds in emergency loans to Royal Bank of Scotland and HBOS at the height of the credit crisis last year.
The British central bank did not give details of the loans in its annual report published in May because of fears of its impact on confidence in the banking system.
However, it said it now felt there was no longer any need for secrecy, with the two banks on a sounder financial footing.
HBOS is now part of Lloyds Banking Group after a takeover brokered by the British government, while the government stake in RBS is rising to 84 percent after the latest cash injection.
Lloyds is tapping shareholders including the government for 13.5 billion pounds in the world's largest rights issue. HBOS shareholders would have been unaware of the BoE loan when they backed takeover by Lloyds last December.
"This was a dire emergency," Bank of England Deputy Governor Paul Tucker told parliament's Treasury committee.
"It would also be a great mistake to think that a lender of last resort was waving away all the problems. It has to be a bridge to a fundamental solution. In this case the fundamental solution was state control," he added.
COLLATERAL
The banks provided collateral in the form of residential mortgages, personal and commercial loans, and the UK government issued debt with a total value in excess of 100 billion pounds. They have both repaid the emergency loans.
"In exceptional circumstances, as part of its central banking functions, the Bank acts as 'lender of last resort' to financial institutions in difficulty in order to prevent a loss of confidence spreading through the financial system as a whole," the BoE said in a statement to the committee.
"Accordingly, the Bank extended Emergency Liquidity Assistance (ELA) to two institutions, RBS and HBOS, in the autumn of 2008."
Total use of ELA across both banks peaked at 61.6 billion pounds on 17 October, 2008. Use of the facilities peaked at 36.6 billion pounds for RBS on 17 October and at 25.4 billion pounds for HBOS on November 13.
"This is a powerful reminder of how close the banking system came to near collapse," Prime Minister Gordon Brown's spokesman told reporters.
Finance minister Alistair Darling confirmed that the Treasury had authorised the loans.
"This indemnified the Bank on a net basis against losses that it might suffer or incur in connection with the Bank's commitment to ensure that the banking system had sufficient access to liquidity," Darling said in a letter to the head of the Treasury Select Committee.
The RBS facility was repaid by 16 December 2008, and the HBOS facility by 16 January 2009.
