Speaking at today’s Treasury Select Committee, MPs suggested that as it appears the Government will charge RBS £6bn, provide £13bn and then provide another potential £6bn, it could be argued this further potential injection of £25bn means the bank is now in fact nationalised.
King replied: “Most of the major banks do need significant support. In the case of RBS, it can be argued that the Government owns more than 50 per cent of the equity of the bank. I don’t see a significance difference between that and outright nationalisation except in the sense that the system of buying up shares has the great merit of trying to make clear to everybody in the world that nobody thinks the Government should run these banks indefinitely.”
King said going forward, after the asset guarantee scheme is fully enacted, there are a range of options for the Tripartite to consider as it continues to intervene in the troubled banks: “A split between a good bank and a bad bank is feasable, the difference between that and insuring assets is a matter of degree; it’s not a connotative issue,” he said.
But King warned this couldn’t be rushed. He said: “I am not keen on the taxpayer rushing in to buy assets before we know what the price is, that is why we must wait until the end of the process.
“But at the end I am certainly attracted to a process that cleans up and restructures the banks’ balance sheets, that is absolutely vital. That was the lesson from earlier banking crises, we have to get to grips with things and realise that the balance sheets have to be cleaned up.
“Only at that point will you have a good bank that people will have confidence in and can to return to normal. The sooner that happens the better, but we have to take the time to analyse the state of the balance sheets first.”