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Govt considers full nationalisation of RBS

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The Government is discussing the possibility of fully nationalising Royal Bank of Scotland after growing frustrated at its failure to lend to UK businesses.

According to a report in the Financial Times, Cabinet ministers are discussing whether to spend around £5bn to buy the remaining 18 per cent of the bank the Government does not own. However, the report states Chancellor George Osborne is against this idea.

The Government bailed-out RBS in October 2008 with £45.4bn of taxpayers’ money, to prevent it from collapsing following its near-ruinous acquisition of ABN Amro.

The Government has tried various schemes to free up credit, like its flagship Funding for Lending scheme, which launched yesterday, although the report states some Cabinet ministers believe these schemes have not worked and forcing RBS to lend is the only thing left it can do to kickstart bank lending.

An unnamed official told the FT: “This is a conversation that takes place all the time.” Another unnamed official said calls for the nationalisation of RBS had grown after poor growth figures in the second quarter and the bank’s continued inability to clear up its balance sheet.

However, the report states several people close to RBS said full nationalisation is unlikely.

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Comments

There are 9 comments at the moment, we would love to hear your opinion too.

  1. But they said they wouldnt put any money into the banks ??

  2. Odd,

    If you own 80% of the stock already you don’t need to own the rest, you simply take control of the board, and dictate what you want. The board works for the share holders, if 80% of the shareholders demand that the company is run in a particular way, and the board refuse, the 80% share holder replaces the board.
    Simple!

  3. Maybe the RBS needs more funding and this is a way of putting it on the table without too much hassle.

    We would not want the RBS to have a run on it would we now!

  4. re: anonymous
    my thoughts entirely, full nationalision is unlikely as rbs’s ballance sheet would be transferred to the governments. in 2008 this was around £1.2 trillion. you can make all the credit in the world available interest free but without a stable outlook theres no demand. we need a plan for actual growth before business will invest.

  5. The banking problems were caused by management teams who knew very little about core banking principles. Greedy shareholders allowed boards to be dominated by risk takers. The views of qualified professional bankers and risk managers were subordinated to those seeking to satisfy the demands of analysts or reap ridiculous bonuses.

    So the problems at RBS resulted from unwise investments and a lack of credit risk discipline. Heaven help us if a bunch of politicians who know even less about banking and credit risk are allowed to take control of credit risk and quality. If that is likely then they are very welcome to take my remaining RBS shares!

    I fully agree with the comments above. This is as much about demand for credit as it is about willingness to lend. Show me a corporate or SME relationship manager in a bank who wouldn’t bite your hand off for a good opportunity to lend.

  6. Anonymous | 2 Aug 2012 9:46 am

    You do have to take ownership of the entire bank if you are going to take over control of the board particularly to avert legal suits from any large holdering minority shareholders when your actions can potentially devalue the shares even further.

  7. The other reasons why the government would want to take over full ownership of the bank is to break it up as the sum of the parts is probably more valuable than the whole.

    I think RBS could be broken up into a least six to ten different organisations which could then provide a net profit to the UK tax payer is a each privatised over the next few years.

    I think people would be really surprised at what brand names Royal Bank Of Scotland owns as their interests are not only just in banking.

    It is a fact that the British banking monopoly needs to be broken up as only then will true competition and market conditions get back to normal.

    I think they also should do a similar thing to Lloyds as at present they control 65% of all mortgages in the UK that is not a good thing.

  8. I think its a great idea, Mr Cameron will see first hand how bad the FSA are and how much it costs to provide for them, and the levies.

  9. Forgive me for being overly simplistic, but how does a bank justify lending out money whilst it’s main priorities are to increase capital reserves and maintain profits for shareholders?

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