4 Jun 2013

RBS: to split, or not to split?

Members of the banking commission have only been in receipt of the 550-page draft conclusions since Saturday morning, yet leaks are already starting to appear. At least, certain politicians inside the commission are starting to use the press to push forward their own view of what should happen to the majority state-owned RBS.

And what is abundantly clear already is a clear split is emerging – not with regard to RBS, but inside the commission itself.


Because, for there to be a recommendation on a break-up of RBS, it would require agreement from all members of the commission. Yet five of those members – including the chairman himself Andrew Tyrie, fellow Tory MP Mark Garnier, Labour’s Pat McFadden and Andy Love, and the LibDems’ John Thurso – have all said they would wait until the Treasury has published its report on the economics of a good bank/bad bank break-up of RBS before drawing any conclusions on the proposal.

The commission only took evidence on a potential RBS break up from Sir Mervyn King, who was in favour of a break-up and that view was endorsed by at least one member of the commission, Lord Lawson.

For that reason many members are too nervous to jump to any conclusions, given how emotive the future of the bailed-out bank is.

Instead, I’m told, the commission, in its draft report, has laid out the options for RBS and is urging the chancellor to get on with one of them in the belief that a uncertain future for the bank is bad for the British economy.

As one member of the commission put it to me: “The government’s got to make its mind up… and it’s got to pull its finger out. We’re not recommending anything at all apart from: further delay causes a problem in terms of the economy.”

Broadly, the options are: a break-up into good bank/bad bank (which we already know George Osborne has himself dismissed as too complicated); a break-up into regional banks to increase competition, (an option favoured by the Archibishop of Canterbury Justin Welby); or a so-called “helicopter drop” of shares to the public, where the government may or may not retain a stake.

This latter option is of course attractive to the chancellor as it would give him the opportunity for a pre-election giveaway to all of us. And an opportunity to remind voters of exactly what got us into this mess in the first place. Labour, of course.

Either way the pressure is on. The chancellor wants to lay out his case for the future of RBS at his Mansion House speech on 19 June.

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One reader comment

  1. Andrew Dundas says:

    As I recall it, the “bail-out” didn’t not cost the taxpayer anything.
    Only a very small payment was made. The big money was substantial HMG guarantee of RBS’ debts that were given in exchange for shares.
    Taxpayers – that’s you and I and your other readers – did not pay any money.
    There were other guarantees of RBS debts that were paid for with RBS shares issued to us. But our guarantees didn’t cost us anything – because they weren’t needed.
    Consequently, nearly ALL of the sale proceeds will be a net gain.
    Moreover, a lot of the so-called “non-performing loans” are not losses. They’re simply loans that are likely to be paid back late or only partially and as assets are disposed of. Those disposal payments depend on when and whether our economy gets going again. Perhaps we’ll be stuck in this lift for as long as Japan has? Who can say?
    Whichever way you look at it, we (taxpayers) stand to make a massive profit out of bail-outs that cost us almost nothing.
    Perhaps we owe Gordon Brown a fiver for coming up with that brilliant wheeze?

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