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Regulatory uncertainty delaying sale of state owned banks

UK Financial Investments says uncertainty over the future shape of financial regulation is making it more difficult for Government bank stakes to be sold.

The Government is currently splitting the FSA into two new regulators, the Prudential Regulation Authority and the Financial Conduct Authority. The draft Financial Services Bill, which will deliver the change is about to go through parliament, with the regulators expected to begin operating in early 2013.

In its annual report, published yesterday, the body overseeing the sale of the state owned banks says it will not start the re-privatisations until it had more clarity on future regulations.

UKFI chairman Sire David Cooksey says: “Our ability to commence a share sale programme of the Government’s investments in Lloyds Banking Group and Royal Banks of Scotland has been impacted by the ongoing uncertainty. We therefore await further clarity in relation to the work of the Independent Commission on Banking and other regulatory changes before we will be able to recommend the start of the process of selling the shareholdings.”

The ICB is set to report in September. In its interim report, published in April, it proposed ringfencing retail banks and making them holder higher levels of capital.

In June, UKFI recommended that Northern Rock be sold with the Chancellor announcing the sale in his mansion House speech.

The state owns 83 per cent of RBS and and 41 per cent of Lloyds.

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