Senior UK government figures are considering fully nationalising RBS
Scottish news: RBS nationalisation a prospect as bank prepares to announce £1.5bn in losses
by Jamie Mann
Senior figures in the UK government are reported to be discussing the full nationalisation of the Royal Bank of Scotland, in what would be an attempt to kick-start business lending.
The development comes only hours before the bank is expected to post pre-tax losses of £1.5bn in the first six months of this year.
Chancellor George Osborne is believed to be opposed to a full buyout of the financial institution as it would expose Britain’s taxpayers to even more risk. HM Treasury is also reported to be strongly opposed to full nationalisation - preferring instead for the banks to be returned to the private sector.
Responding to the reports, the Treasury said: “We are committed to repairing and returning RBS to full health so that it is able to support the UK economy in the future, and the current strategy is working to achieve that.
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“The government’s policy has always been to return RBS to the private sector, but only when it delivers value for money for the taxpayer.”
Government ministers had originally envisioned a return to the private sector but significantly increased public ownership to 82-83 percent, after rescuing the bank from toxic debt following the 2008 financial crisis.
RBS had come dangerously close to collapse when the bank made losses of over £24bn under then-CEO Fred Goodwin.
However, Scotland’s largest bank has not been without scandals and fiascos since Mr Goodwin – publicly blamed for the bank’s bad decisions, resigned in 2009.
Up to 13 million RBS, Natwest and Ulster Bank customers were left unable to properly access their accounts from June 19th this year; the former two experienced problems for 10 days whilst Ulster Bank customers did not see normal service for an entire month in what RBS Group called a “computer glitch” - this has now led the bank to set aside £100mn in order to compensate customers.
RBS is also the next bank in line to be put under scrutiny as the spotlight of the on-going Libor investigation moves on from Barclays.
RBS CEO Stephen Hester last week admitted the bank expected a sizeable fine, shortly after Barclays shelled-out £290mn for Libor-rigging.
Mr Hester told the Guardian: "RBS is one of the banks tied up in Libor. We'll have our day in that particular spotlight as well,".
Ministers are now asking whether purchasing the remaining 18 percent stake from private shareholders is the best way to stimulate business lending.
However, sources close to RBS told FT that any further nationalisation of the bank was unlikely, questioning how the government would force the bank to lend to small businesses without burdening the taxpayer with substantial risk.
Insurance underwriters must calculate the costs of providing professional indemnity insurance as legal costs associated with banks mis-selling, Libor rigging and anti-trust investigations related to legal challenges skyrocket. Libor costs alone could be “a bigger game changer” for underwriters than the financial crisis of 2008, said an analyst of a major international insurance brokers.
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