Government to sell off majority stake in bailed-out RBS
- Credit: PA
Seven years after the global financial crash, the government is to begin selling off its majority stake in the bailed-out Royal Bank of Scotland, chancellor George Osborne has announced.
Mr Osborne said the 'decision point' had been reached after an independent review concluded the loss to the taxpayer would be more than offset by the profits on other bank share sales, including its stake in Lloyds Banking Group.
The move has been endorsed by Bank of England governor Mark Carney, who warned that delaying the start of the sale could lead to the taxpayer losing even more.
It comes after the then Labour government injected £45.5bn into RBS - taking a 79pc stake in the bank - to prevent its collapse in the wake of the crash of 2008.
In his annual Mansion House speech to the City last night, Mr Osborne said the size of the government's holding meant that the sell-off would take 'some years' to complete.
While the complexity meant that the first offering - to take place in the coming months - would be to financial institutions only, he said future disposals could include ordinary investors.
An independent review by Rothschild advised that if the RBS shares were sold in one go at their price on June 5, the loss to the taxpayer would be about £7.2 billion.
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That compares with an estimated overall profit of more than £14bn if all the government's remaining bank shares were sold, against a forecast loss of £20bn to £50bn at the time of the bailouts.
Mr Osborne said: 'In the coming months we will begin to sell our stake in RBS. It's the right thing to do for British businesses and British taxpayers.
'Yes, we may get a lower price than Labour paid for it. But the longer we wait, the higher the price the whole economy will pay.
'And when you take the banks in total, we're making sure taxpayers get back billions more than they were forced to put in.
'From bailing out the banks to bringing them back from the brink, now is the time for RBS to rebuild itself as a commercial bank no longer reliant on the state, but serving the working people of Britain.'
In a letter to the chancellor, Mr Carney said public ownership of RBS had 'largely served its purpose' and a 'phased return' to private ownership would promote financial stability.
'Continued public ownership without a foreseeable end point runs risks including limiting RBS's future strategic options, and continuing the perception that taxpayers bear responsibility for RBS losses,' he said.
'In these regards, there could be considerable net costs to taxpayers of further delaying the start of a sale.'
Speaking alongside the chancellor, Mr Carney said the 'age of irresponsibility' was over for the City as he set out new plans for rogue bankers and traders who break the rules to be jailed for up to 10 years.
He made the remarks as the Bank published the final report of the Fair and Effective Markets Review (FEMR), which he and Mr Osborne launched a year ago in the wake of a series of City scandals.
It calls for UK criminal sanctions for market abuse to be extended to a wider range of areas and the lengthening of the maximum sentence available from seven to 10 years.
Mr Carney said if unchecked, markets were 'prone to instability, excess and abuse'.
He blamed poor infrastructure for allowing the US sub-prime mortgage crisis to 'light a powder keg under UK markets, triggering the worst recession in our lifetimes'.
The sell-off of RBS shares was welcomed by the bank's chief executive Ross McEwan.
'We are pushing ahead with our strategy to build a simpler, stronger, fairer bank that is totally focused on the needs of its customers and centred here in the UK,' he said.
'When the government starts selling its shareholding, it will be selling a bank determined to be the best in the country.'
SNP economy spokesman Stewart Hosie said: 'George Osborne should have made this announcement to the House of Commons, not at a dinner in London.
'The chancellor's main concern should be providing a good deal for the public and ensuring taxpayers receive what they are owed.'