11 Jun 2015

RBS sell-off, time to move on?

George Osborne must have concluded that to wait for RBS’ share price to hit the level that we paid for them in 2008 would take… well… forever. And he’s probably right. With the bank still mired in fines and lawsuits and with plenty more to come, the likelihood of its shares reaching that critical break even point seemed like a very distant possibility.

So George Osborne could sit there and continue to take the flak every time something goes wrong “at the state owned bank” or he can cut it loose.

There’s a chance too, as he was trying to reassure us yesterday, that starting the share sale might just give the bank some momentum (or at least the impression of momentum). The chance to get back on its own two feet without ministers forever breathing down its neck.

But there’s also a good chance the shares will just continue to languish and no momentum will be gathered at all. Rothschild, the investment bank that advised the Chancellor, has told him the “market conditions for financial assets and bank shares are currently good.”

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But RBS isn’t just any financial asset. Lest anyone forget it, RBS was the bank we were forced to bail out in 2008 to the tune of £46 billion. Since then it’s been involved in a host of post-crisis financial shenanigans – from the mis-selling of  interest rate swaps to the rigging of both Libor and foreign exchange markets.

Rothschild also reckons that if the Chancellor were to sell all the remaining bank shares now, from Lloyds and RBS, then overall -including all the fees paid by the banks for the assistance they received – the public would be £14 billion better off.

Although crucially, that does not include the borrowing costs for the billions in funds needed to bail the banks out in the first place. Include that and we’d still be under water.

But you can do the maths on RBS forever. The truth is, at some point the Government, the bank, all of us, have to move on.

The crucial line in George Osborne’s speech tonight is that he hopes by starting the share sale process it will “send a strong signal that RBS is on the road to recovery.”
After the roller coaster ride that we’ve all been on with RBS over the past 8 years, that’s all he really can do. Hope. Because there’s no guarantee the plan will work.

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5 reader comments

  1. John Inglis says:

    Is this serious comment ” all of us have to move on”? What about fixing the roof and living within our means? Where did those Osborne stories go in fantasy finance world? £13 billion loss to sell off shares doesn’t sound like living within our means more like giving the city another free ride at our expense. Royal Mail- more share sell offs to institutional investors -is there a Tory pattern here?
    Do you see the troika saying to Greece lets move on and just not bother with that debt?

  2. Alan says:

    So we have to move on? No accountability, no recompense for the millions of us who continue to be looted by those who claim to control finances and their trusted partners. Sound advice as always.

  3. Andrew Dundas says:

    Recall: “RBS” is the bank that Alec Salmond praised for its takeover of ABN-Amro. Neither Salmond nor the board of RBS had bothered to find out that that European Bank was stuffed full of bad debts. And worth nothing.
    As a consequence, British taxpayers had to create £46 billions of debt to rescue that Scottish controlled bank from its inevitable collapse. Fortunately, our own British Government Bank (the Bank of England) bought up much more than £46 billions of government debt in the following year. Since the BoE is wholly owned by us, that debt will cancel out in the future. Bingo! Quantitative Easing writes off Government debts!
    So, UK and foreign investors will be asked to stump up real money to buy a Bank that we bought with QE money. All in all, we stand to drag in loads of money currently stashed away in mountains of low-interest deposits that big Corporations don’t want to invest in their own businesses. Will that sale of RBS increase money supply and aggregate demand? Probably.

  4. JOHN KENNY says:

    BEFORE THESE BANKS MOVE ON , DO NOT FORGET OUR 2000/ 3000 % INTEREST WHICH WE CHARGE FOR LOANS WHEN PEOPLE DO NOT ASK, THE SAME AMOUNT BANKS CHARGED US, ITS BEEN TO COURT SO IT MUST BE FAIR.

  5. anon says:

    this is clearly a ridiculous decision and needs to be stopped. also who has provided this nonsensical advice? this has to be urgently scrutinised and if needs be overturned by Parliament

Comments are closed.