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No quick sale of RBS and Lloyds

Robert Peston | 08:35 UK time, Monday, 13 July 2009

UK Financial Investments' first annual report, which has just been published, captures the idiosyncratic and perhaps surprising relationship between the government and the two giant banks rescued by taxpayers, Royal Bank of Scotland and Lloyds Banking Group.

As is implied by the data in the report, these two - or rather Royal Bank of Scotland and HBOS, which was bought by Lloyds - escaped full nationalisation only by the very fine skin of their teeth.

RBS and Lloyds banks logosBy the time the Treasury's scheme to insure them against losses on £585bn of their loans - what's known as the Asset Protection Scheme or APS - is put into effect, taxpayers are likely to own 84% of Royal Bank and 62% of Lloyds.

These banks belong to us, to taxpayers. And the monetary value of our investment in this duo is huge, though putting a precise number on it isn't easy - in that the losses we'll incur on the insurance scheme or APS should be seen as a de facto investment, and we won't know the scale of that for years.

If the losses turned out to be no greater than the insurance fees paid in shares by the banks, than taxpayers' total capital at risk could be "as little" as £53.5bn.

But if RBS's and Lloyds' lending and investment portfolio turns out to be considerably worse than feared, well then we might have to realise a staggering £100bn from the sale of our holdings in the two banks in order to get our money back.

The only thing that can be safely concluded is that taxpayers have invested a colossal and unprecedented sum in keeping these banks alive.

The annual report puts it like this:

"Following the issue of B shares in connection with the Asset Protection Scheme, the value of the UKFI-managed investments in these banks will be around £60bn at current market prices".

And, for the avoidance of doubt, if we sold at £60bn we would be selling at a loss - because the market value of taxpayers' initial stake in the two banks is about £11bn less than we paid for those first holdings.

In other words, there's going to be an absolutely enormous asset to sell, as and when these stakes are privatised.

Now what's really striking is how little influence the government wants over these banks in return for the unprecedented support that taxpayers have provided to them.

Yes, the two banks have promised to make more credit available to UK businesses and households, as a condition of transferring potential losses to the public sector under the APS.

Monitoring that the banks honour those lending agreements is a responsibility for the Treasury, not for UKFI.

But apart that lending tit for insurance tat - whose scale is not sufficient to make good the perceived credit deficiency in the UK - these banks have not become explicit instruments of government policy.

Some would say that having been more-or-less nationalised, the duty of the government is now to turn them into directly controlled credit-creation machines, an alternative perhaps to the less predictable initiative to ease lending conditions which goes by the name of quantitative easing.

However, the chancellor and prime minister have set up UKFI with an explicit mandate to make sure that doesn't happen.

UKFI's overarching objective, as explicitly agreed by government is to "develop and execute an investment strategy for disposing of the investments in an orderly and active way through sale, redemption, buy-back or other means".

And in order to do that, it and the government believe that the banks have to remain autonomous commercial entities, and not tools of macro-economic policy.

This is how UKFI chief executive, John Kingman, puts it in the annual report:

"We operate like any other active and engaged shareholder, on a commercial basis and at arm's-length from government...We work closely with our investee banks, for example through strengthening their boards.

Our investee banks continue to be separate economic units with independent powers of decision and, in particular, will continue to have their own independent boards and management teams, determining their own strategies and commercial policies".

So page after page of the annual report is about three things:

• how the government will not micro-manage the banks;
• how UKFI will attempt to help the banks improve the quality of their boards, their governance and risk controls (there'll be a lot more on this in a government-sponsored report by Sir David Walker to be published on Thursday);
• and how UKFI intends to flog those enormous holdings in the banks.

Here's the paradox.

As the annual report makes clear, flogging perhaps £100bn of stock in Lloyds and RBS - which is what the holdings may easily be worth in a couple of year - can't be done overnight.

That's just too big a mouthful for investors to swallow quickly.

How can I be certain? Well in the entire history of Europe, there have only been three occasions when banks (or indeed any companies) have sold shares worth more than £10bn to commercial investors in a single exercise (they were the share sales by HSBC, RBS and UBS all carried out in 2008 and 2009).

Which is not to say that the RBS and Lloyds stakes can't be flogged, but just that it could take quite a few years.

Now that'll be quite a few years during which protests aren't likely to subside that the banks aren't doing their civic duty of supporting the economy.

So UKFI's role as the human shield of the independence of RBS and Lloyds may become increasingly fraught.

Update, 10:18 AM: My favourite bit of the UKFI report is its stern warning to the City that it won't give highly profitable mandates to sell its stakes in the big banks to any investment bank it regards as leaky. It says:

"we need to be especially careful that our dealings with intermediaries - including our selection processes for investment banking advisers - do not create undue risks of leaking our intentions to the market".

There will be no "pre-soundings" of investor appetite, it says.

Crikey. Them investment bankers won't like the idea of flogging this stuff into a market that hasn't been "conditioned".

Update, 10:50 AM: Perhaps the most striking disclosure in the report is that the annual remuneration of UKFI's chief executive, John Kingman, is £143,000.

Of course, that's a lot of money by almost all standards - but not, of course, by the standards of those he employs to run Royal Bank and Lloyds.

Their annual remuneration, including incentives, is as much as 20 times as great.

It's also about half as much as the remuneration of some local authority chief executives.

Since Kingman is arguably the most powerful individual in the British banking scene, perhaps his pay will set the new norm for the industry.

If it does, he'll be barred from the City for life.


  • Comment number 1.

    so looks like it will not be a swift exit....the UK taxpayer will have to be very patient and certainly wait until after the government that got them into this mess is queuing at the job centre.... Lloyds shareholders should fight for compensation, the board has let them down trying to do the government a favour...

  • Comment number 2.

    It's the sticking plaster conundrum, do the banks rip off the plaster in one go or peel it off slowly?
    Three words - 'worse than expected' - will the last couple of years and the next couple. The banks are all engaged in a massive damage limitation exercise, backed up by the government, as they try not to expose the greed and mismanagement that was endemic in the boom years.

  • Comment number 3.


    Isn't it about time that everyone was clear that these banks could not have gone into administration, or bankruptcy? That is, the UK government HAD to bail them out? It was not optional.

    Because it dawns on me that this was a contributory factor in what led up to the situation.

    Furthermore, and more importantly, if a repeat of the fiasco is not going to occur in the future, then the UK Government, BoE, FSA and Uncle Tom Cobbly an' all an all had better develop a way - probably in association with other governments - that large banks CAN be allowed to 'go to the wall', thus giving the Government and taxpayer options.

    Otherwise, basic behavioural psychology would suggest that as there is no real sanction against large banks allowing wayward seniors to take 'a gamble too far', then the behviour will re-occur.

    Banks NEED boundaries for the sake of shareholders, customers and the taxpayer - to mention just three groups of stakeholders.

  • Comment number 4.

    "insure them against losses on £585bn of their loans"

    £585bn of potential losses, handouts and bonuses will be paid for by years, even decades of, tax rises, public spending cuts and astronomical riase in debt for years.

    It is like someone have issued IOUs in our name, without our consent, not for our benefits and took handsome amount for themselves too.

  • Comment number 5.

    Perhaps an interesting question for future academics would be

    "Compare and contrast the support given to and the suggested terms imposed on the UK banking sector and the UK motor industry during the credit crisis in the early twenty first century?"

    We have thrown huge amounts of money at the banks with no clear exit strategy and no control over their operations yet Jaguar LandRover need a loan infinitessimally small in comparison and the government wants seats on the board.

    People within the Westminster / Square Mile bubble still don't seem to get the irony of all this and yet wonder why politicians and bankers are viewed with such contempt and anger by the average person in the street.

  • Comment number 6.

    Given the state of Northern Rock, which has had interference from this government, perhaps they're somewhat frightened of a repeat?

    Also, looking at the tweaks to the tripartite system (lessons learned? Ha!) its somewhat obvious they're hoping for another banking bubble - one of those magically sustainable ones you get in La-La Land - in which to start selling off RBS and Lloyds and proclaim the economy saved.

    It gets a little like Groundhog Day, only those tears aren't from laughter, it's from watching our fiscal future swirl down a urinal and gurgle off into the sewers.

  • Comment number 7.

    The current issue of Private Eye refers to the People's Bank of Scotland (RBS? HBOS?), and has the following Late News item:


    THE Government last night announced it was stepping in to nationalise a bottomless pit.

    "We believe that this bottomless pit will prove to be a good long term investment for the taxpayer as we pour billions of extra pounds of public money directly into it."

    "We hope to sell the bottomless pit at a later date back to the private sector at a knock-down price to maximise the losses incurred by the taxpayer"

  • Comment number 8.

    Perhaps we don't need to sell? We could take a view that this is an investment and the tax payers take a 6% dividend as an annual payment.If times are good when can reduce the dividend to allow bigger pay outs when growth is slow.
    I am of course being naive ,if GB gets in at the next election he will blow the money on "Essential" spending , DC will want to sell any cost to reduce debt,with a good commission for his mates in the city.

  • Comment number 9.


    Northern Rock would probably have survived without government interference, but Blair needed to transfer the best part of their book to JP Morgan as his dowry. Similar crimes happened in the USA.

    As it was, a clear message was sent to all the banks to stack up debt as a patriotic duty, and if the worst happened they would also be bailed out.

    The worst happened and they were bailed out, but the underlying problems are the same and are not being addressed. The debt is still rising, and the government is using our good money to build more debt.

    We, our children, and many generations into the future are now part of the uncontrolled soon to be uncontrollable debt spiral.

    History tells us that the only way out is war. Hitler saw it, and so did Bush and Blair when they invaded the Middle East. Obama and Brown are keeping the show on the road, with the help of their friends in their oppositions.

    If we don't get rid of these criminals - red or blue gangs - who infest our governments, we will be in real trouble very shortly.

  • Comment number 10.

    Certainly any interference in the running of these banks by the government would be disastrous, if their record on handling the economy is anything to go by. It may take years for these banks to recover to a point where anyone would be interested in buying, and as long as the present government is in power, confidence in the financial sector is unlikely to improve. Whatever happens over the next few years, one thing is assured, the taxpayer will not come out winning; politicians think that the taxpayer is a cash cow that can be milked forever to cover it's incompetence. It may well be, that the reason the government is unwilling to countenance any degree of effective control over the financial institutions is that it believes that the city may yet dig the economy out of the hole it is in , in time to save Labour from oblivion at the next election, and if not then they still have it there as the whipping boy to carry the can when they plead with the electorate for survival.

  • Comment number 11.

    A Dose of Reality Part 1

    NR, RBS and HBOS were bankrupt. (In the sense that they could not continue trading with the business models that they were using. That is they ceased to be a 'going concern'.)

    We chose not to let them take advantage of the bankruptcy laws. The consequences of this are dire to us. The losses at RBS and HBOS are of such a size that it puts the whole Nation's balance sheet under stress - indeed if we had been a business we would have in all probability have been unable to avoid bankruptcy ourselves (see California and they did not even bail out any international banks!).

    It is only because the US Dollar and Euro countries have had to cope with similar (but actually proportionally far smaller) problems that our currency has not collapsed. Indeed if the pound had collapsed we might be in a better place today and be looking at a more rapid recovery.

    The Nation has chosen to take on board gigantic losses. (Every working citizen has been lumbered with 30 to 50 thousand pounds of debt.)

    A Dose of Reality Part 2

    1. No bank can be allowed to be in a position to lumber the Nation in this way again.

    2. This can only be achieved by ensuring that the absolute size of any and all bank's liabilities are within the ability of the Nation to bail out.

    3. This means the Nation can no longer sustain the position of London as a centre of International Finance. (Stark as this may seem.)

  • Comment number 12.

    I don't think the recent RBS, HSBC & UBS share offers are a good example of potential uptake of a later and larger offer. As commented above, these banks were on the brink of disaster and continue to constitute a risky investment. If shown to be in recoverable state, surely the banks will become a decent investment and show uptake without congruence to that of these early offers.

  • Comment number 13.

    Do we own the banks, or do they own us?

  • Comment number 14.

    How many more customers do these banks need to be worth the extra £11,000,000,000 ?

    Once Brown (with his madcap spending addiction) is out of the way, I'd be happy to move all my accounts to these banks so the help get my (taxpayer) money back.

    I am sure every other taxpayer would be happy to do the same (its in their own interest).

    Bit of a shame all the other banks will go bust in the process, but there you go...

  • Comment number 15.

    "So UKFI's role as the human shield of the independence of RBS and Lloyds may become increasingly fraught."

    Robert, when you're a human shield, the best strategy is to assume that the gun held to your head is loaded and that it's not just a toy gun. You have to assume the worst when you're held as a feeble hostage.

    We'll have to assume that we'll need to raise £100bn. As you point out, the figure is unknown, but £53.3bn is different from £100bn! This vagueness has been the bete noir of the financial crisis. If we were allowed to know the extent of the debt, we could stop panicking and get on with planning. Not knowing the full extent of the problem is hanging over our heads like a sword of Damocles.

    I'm beginning to wonder if the gunman and the negotiator are working together on this one. The government knows we will demand more say in micro-managing the banks if our stake is so huge. Isn't that what they want, whatever they say?

  • Comment number 16.

    if this UKFI realy had the taxpayers interests in mind they wouldnt be looking to sell out so quickly in honest terms they would hold them untill share prices have at least risen to 10 percent above what the government paid for them.
    but what do i know i am not an overpaid banker with a massive profit bonus attached.

  • Comment number 17.


    Let's get this straight shall we? Taxpayers don't own the banks anymore than the taxpayers sanctioned this colossal amount of lending. I certainly didn't along with many others.

    If asked I would have mandated for a complete regime change at Government, FSA and in part Bank of England level as the price to pay (just as many private sector senior management have to) when something as catastrophic as this happens on somebody's watch.

    I understand that the banking infrastructure is required to ensure a working economy, which is why the bank bailouts cannot be compared directly to other industries (save other utilities like electricity for example).

    However, there were ways in which the banking infrastructure could have been saved without the enormous intervention (I'm not going into it here). Certainly, Northern Rock, B&B, HBOS should have been allowed to fail. Silly silly Lloyds (& the Prime Minister of course). RBS was a different matter with its huge global liabilities.

    The problem we have now is similar to Japan's in the 90s. Many are saying we have acted quickly and identified the toxic assets. Yeh right.......there's a lot kmore bad debt write-offs to come and bigger than last time - watch out for the latest LloydsHBOS figures as a sign when they are announced. This is before the 'bad' commercial real estate works its way through the soured system.

    Incidentally the point that banking is part utility strengthens the argument that it needs to be split between normal account banking and investment type banking if indeed banks are too big too fail......

  • Comment number 18.

    @hodgeey, #9

    I'm not sure why you think NR could've continued to function - it was effectively insolvent when it was nationalized.

    This year it has made a loss of some half billion pounds, and has even fallen beneath it's regulatory requirements, which takes some doing as it has somewhat looser restrictions on it than other banks operating in the UK.

    As for a war happening, that's more Russia's bag, we certainly can't afford another one nor have the equipment to pursue one. I can't argue about the removal of the MPs of any stripe though, Westminster is the root of most of the UKs problems and is an unlikely source for any solution.

  • Comment number 19.

    For Sale -

    A couple of Banks with the debts no other banks wanted to take on, but with tighter Governance and Risk Control in place!

    Time to see if the Spin Doctors are worth the money

    the Gov allowed the banks too have much influence on the economy and they cant rid themselves of it now. They are still trying to keep the cart before the horse!

  • Comment number 20.

    The sale of our share of these banks should be structured in such a way that breaks these institutions up in their constituent parts so that any potential failure of the banks does not endanger the whole financial system.
    It is obvious that these assets will have to be disposed of over a longer period of time. One would hope that unlike Gordon's sale of Gold reserves, he doesn't pre-announce the sale, which cost us billions in lower prices.

  • Comment number 21.

    Nice to know I have a stake in the nationalised bottomless pit, as I was not consulted. If the bottomless pit is sold the return on my investment will be not having to pay even higher taxes in the future. Wow. How good does that make me feel? I don't buy the Government line that there was no alternative to part-nationalisation of the banks. Would we have been any worse off (as taxpayers!) if one of them had been allowed to fail? S I believe the Government, by trying to shore up the old, failed, system has missed an opportunity to introduce new and innovative structures. Am I alone in thinking that the 'S' in RBS and HBOS played a bigger part in the decision to keep these banks afloat than Brown and Darling are prepared to admit? One way ticket to China or India anyone?

  • Comment number 22.


    You write "and the government believe that the banks have to remain autonomous commercial entities, and not tools of macro-economic policy."

    This, for me, is exactly the problem. With all due respect to Mr King, who knows a lot more than I do about financial matters, and although I appreciate a witty remark as much as anyone, the true problem isn't whether banks are "too big to fail", but whether a working financial sector is a prerequisite to the proper working of a modern state. And it looks like it is.
    Don't misread me, I'm all in favor of free-trade, free-markets, and autonomous commercial entities. But there is a moment when the power of a Henry Morgan or an East Indian Company is too much, and when after they have made a lot of money for themselves, sometimes served the interest of the country and more often screwed up a lot of things another type of organization has to be set up.
    A repeat of the 1930s? Looks more like India in the late 1850s to me.

  • Comment number 23.

    This comment was removed because the moderators found it broke the house rules. Explain.

  • Comment number 24.

    After the worst recession for decades it's not surprising it will take time.Scandanavian banks took a few years in the 1990's.

  • Comment number 25.


    When the government got involved, less than two years ago:
    "The FSA judges that Northern Rock is solvent, exceeds its regulatory capital requirement and has a good quality loan book."

    There was also the offshore skulduggery with Granite etc, which was not addressed. The government should have put a stop to that as a condition of the loan, but it didn't. I wonder why?

  • Comment number 26.

    Should have been allowed to fail - now we have this Albatross around our necks - bleeding us dry. This is socialism for the rich.

  • Comment number 27.


    Back to a banking story then Robert!! Can I suggest getting a train out of London to other areas of the UK and just looking at real businesses and talk to real people to establish what is really going on out there. Then comment on real life issues in business rather than just banking stories that are obviously very easy for you to write from your London office. You do work for the BBC not the London Broadcasting Co!!!!

  • Comment number 28.

    Robert playing devils advocate just what would have happened if these banks had been allowed to fail and then the Government had cherry picked on behalf of the tax payer the parts that were worth saving....

    I feel as though we have not got the best of the deal.

  • Comment number 29.

    Could we not have a "tell 'em Sid sent you" campaign for UKFI itself? Don't sell the bank shares, sell UKFI to the public. Allow UKFI to invest in other things from time-to-time, e.g. the Royal Mail - a bit like the Norwegian Oil pension fund.

  • Comment number 30.

    The key figure is perhaps the 585 billion.
    Most of this is sub-prime.
    Sub-prime mortgages were made on homes probably valued at 100k to 200k dollars.
    Those foreclosures are now virtually worthless.
    Add to that UK reposession losses plus downturn business loan losses and the 585 billion is probably close to the real loss for the public, if not higher.
    It's nice to see that Mr Kingmans' pay is reasonable, and he is not involved in the parasitic milking of the British public that many of the others are still engaged in.
    Heavy regulation required, including pay.

  • Comment number 31.

    My understanding of this was that we effectively bought a boat load of preference shares, so we should be getting hefty interest payments from these banks.

    We should be making money on this. It would be foolish to try to offload our stake to quickly, or in too big a chunk. Offer up a set number of shares each year, and gradually release them. That would reduce the risk of volatility to the share price.

  • Comment number 32.

    So the 30 year lie that was Thatcherism has finally died, we have reached a point where the banks are actually worthless Backed by fiat currency (i.e. monopoly money, in fact I think Ill try spending some)

    As for 23,

    You are a disgrace for suggesting Scottish people, delight in British soldiers being killed in action defending the crown. Shame on you!

  • Comment number 33.

    I think this is a pretty good stab by the Government. Much better than the Gold sales that cost us so much when Brown botched them.
    However, the banks are going to be public sector for a long-time. I wonder if the accounting for all this will ever be added up properly.

  • Comment number 34.

    The depths to which British banks plumb can be seen on this link.

    I wonder whether Gordon Brown's much lauded international purge on tax havens includes this obscene tax avoidance scheme ?

  • Comment number 35.


    How on earth can you state that "there is going to be an absolutely enormous asset to sell".

    These banks are completely knackered.

    The only way they could possibly be sold is if the taxpayers gave what would be effectively unlimited guarantees to a prospective purchaser.

    Wake up man! These banks aren't even worth "diddley squat". It would be great if they were.

    They are a massive liability on the nation and will be for a generation.

  • Comment number 36.

    11. At 09:58am on 13 Jul 2009, John_from_Hendon wrote:

    "We chose not to let them take advantage of the bankruptcy laws."

    I don't think so. According to HSBC's Chairman recently, big globalised banks can NOT go into administration or bankruptcy.

    So, in my view, it would seem there was NO choice at all.

  • Comment number 37.

    My share dealing software tells me that RBS' total market cap now is about £20Bn and Lloyds is about £17Bn. At 84% and 62% respectively, that gives a combined value for UK plc's holding at around £27Bn. That's some way to go to get our cash back even on the conservative basis, or have I got it all wrong??

  • Comment number 38.

    #22 Chamfort, you're right of course. The game is how long we can maintain the illusion that the financial system is working, and which unfortunate politician will be in the hot seat when it unravels. The scale of this "crisis in abeyance" is mind boggling.

  • Comment number 39.

    A hundred billion to nationalise the banks and the government want to leave them to run themselves?

    Improving the board of these institutions through UKFI: with whom?

    I look at those two questions and wonder about lunatic and assylums. How can it make sense to allow the same people to run the institutions with ridiculous bonuses again. Some have gone Fred et al but where were the checks and balances allegedly provided by the board? How are those that remain going to provide the needed checks and balances this time?

    Fairy stories?

    Jobs for the boys?

    I can't help thinking that an opportunity to change this country has been missed. I have no idea how it could have been done but with the financial institutions in such a mess and begging for investment surely we could have done better than maintain the status quo with UKFI for our £100billion?

  • Comment number 40.

    At least 1 of the banks should have been allowed to fail. The problem we now have is that there is probably no politically correct way of reducing the overall banking sector or of reducing their costs or of re-modelling them. As the property bubble has burst and in the next few years there will be less consumer money around (through higher taxes and higher unemployment), where are all these banking businesses going to generate revenue/profits?

    Letting a bank fail would have achieved the reduction with the profitable bits being taken up by the prudent banks. Instead what we have is a bloated RBS struggling to keep it all going and LTSB now saddled with the same problem from absorbing HBOS.

    Rescuing the banks has just prolonged the agony. The culling will just be done by a thousand strokes, but without a major restructure to the model.

    Once the banks have done the culling they may be profitable again but will they be worth what the government has invested? If not the government may have to crystallise that loss

  • Comment number 41.

    Everyone assumes we did the right thing by preventing the melt-down of our banking system last October. But I wonder if this was really the case.

    It seems like in economics whatever is good in the short term tends to be bad in the long term, and vice versa.

    What would actually have happened if the banks had all been allowed to fail? Presumably the cashpoints would have failed and suddenly people would have been without the means to buy food. We would have had a national emergency. However, nobody would necessarily have died, we just would have had a few hungry months until a new means of exchange was set up.

    On the positive side, all sterling and foreign debts would have been written off, together with all the governments liabilities for future public sector pensions.

    It is like the pain of declaring oneself bankrupt - it feels terrible at the time but it is wonderful to be relieved of the worry of all that crippling debt.

    I would suggest that we would have been better off taking all the pain in one go, and making a fresh start. This would also have given us the opportunity to set up a completely new model for money and banking. Even better is the fact that it would have turned all those bankers and financiers into paupers overnight.

  • Comment number 42.

    UKFI's overarching objective, as explicitly agreed by government is to "develop and execute an investment strategy for disposing of the investments in an orderly and active way through sale, redemption, buy-back or other means".

    How about simply sending share certificates to all of us, then independently we can all decide what to do with our share. I know it would leave a huge hole sticking up out of government coffers, but as Galbraith said, in the long run we're all dead.

  • Comment number 43.

    Robert, As I understand it, the banks will shortly fail again. The idea that the government will get out at a profit is (and always was) nothing short of delusional.

    The commercial property mortgages are increasingly underwater. Commercial rents are falling reducing valuations. In order to protect their balance sheets, the banks are trying to extend the term of these loans rather than issuing new loans (which requires a revaluation of the property). This is fine whilst rates are low but when they pick up they will have to revalue.

    In the case of RBS 30% of their balance sheet is in commercial property loans...

    We should kiss the money goodbye and Gordon put it on Red and it came up Black...

  • Comment number 44.

    I always thought the advice from the so called financial 'experts' was that shares were a long term investment. It looks that is what UKFI is doing - holding on to them for the long term in the certainty that we the taxpaper will at the minimum gets our money back and more likely make a profit.

    There has been far too much short-termism in the financial sector and this has damaged everyone. The pursuit of out of proportion bonus's has distorted how the directors operated the busibess - to the advantage of the themselves but at the disadvantage of ordinary share holders.

    As to the future of banking they should be split into smaller, more managable businesses. There should be a number of 'basic' banks offering general financial services - current and savings accounts and a good relativly risk free mortgage book with no mortgage offered over say 90% of the property value (based on the average of three valuations) and a much better assessement of the applicants financialo viability. These would be the banks that would be rescued in the future should it ever come to that.

    For those that want more risky investments then there should be specific investment banks. You invest in these on the basis that you would more than likely get a better return for your money but if the business goes belly up then its TOUGH - no taxpayer funded rescue and no compensation scheme to bail you out. I would put the buy-to-let mortgage book into these more risky banks (plus institute other measures to eliminate the tax advatages such as tax relieft on interest as these are business not personal loans).

    My investment 'portfolio' is my small savings, an ISA and a share isa that holds my ex Halifax shares. This has been totally messed up by greedy bankers with more thought as to their own £££ rather than that of the customers they should have been looking after.

  • Comment number 45.


    This Might be off thread a bit, but is there any chance of the BBC journalists telling the UK taxpayers how much the War in Afghanistan is costing the taxpayer we can all see how much it is costing in human lives at the moment, It seems the journalists of BBC are very good at telling taxpayers how much the Banking Crisis has cost the UK, but when it comes to Wars the silence is deafening !

  • Comment number 46.

    #36. Sutara wrote:

    11. At 09:58am on 13 Jul 2009, John_from_Hendon wrote:

    "We chose not to let them take advantage of the bankruptcy laws."

    I don't think so. According to HSBC's Chairman recently, big globalised banks can NOT go into administration or bankruptcy.

    So, in my view, it would seem there was NO choice at all.

    Your view is that the bank is greater than any Nation then?

    Sorry, you are in logic and law wrong. Banks are just constructions of the regulations set up by Nation's fro organisation that are called Banks. and Banks must remember this. If the Chairman of HSBC said this he was and is wrong and he would do well to remember this. His statement seemed to be about HSBC's acquisition of "Household" and that HSBC was going to stand by its acquisition not about the whole banking system or HSBC.

    Any business can go bankrupt.... from the biggest to the smallest. Countries can also go bankrupt (when it is called default). American States can go bankrupt (e.g. California)

    Indeed bankruptcy is in many ways preferable to the pathetic existence on life support of the persistent vegetative state of RBS, HBOS and NR.

  • Comment number 47.

    "28. At 11:17am on 13 Jul 2009, AqualungCumbria wrote:
    Robert playing devils advocate just what would have happened if these banks had been allowed to fail and then the Government had cherry picked on behalf of the tax payer the parts that were worth saving....

    I feel as though we have not got the best of the deal"

    Well, the first thing that would have happened is the biggest stock market crash in history,followed by utter chaos of hundreds of thousands of mortgage holders and depositors queuing outside all of the banks branches. Sterling would then plummet on the foreign exchanges, not in itself such a bad thing but it makes investors even more nervous, therefore the markets would continue to fall even further. With most of the Footsie 100 companies shares in freefall pension funds and other institutional investors would withdraw their money and put it into Treasury Bonds, again forcing the market down. Then there is the small matter of x million frozen accounts to which no-one has access until the administrators have had a llok at the books and decided who is entitled to what remained of the assets. Yes, there is a deposit guarantee scheme in many months/ years do you think it would take for any of that money to get back to Ten Million customers. Of course everyone would have to switch bank accounts in order just to get paid (again, do you think that would happen overnight?) and then there are all of the business overdraft facilities that would be wiped out, instantly putting many small firms either out of business or in terrible financial straits. Within a year 'real' unemploymet would be at five million or so..

    That is just PART of what would have happened, it really is a joke to read so many posts saying 'they should have let the banks fail' like it would have had no effect whatsover...

  • Comment number 48.


    You are a disgrace, How dare you make such comments when good men in the forces are putting thier lives on the line just so you can have the freedom to comment on Blogs such as this. You should be banned from ever writing again.

  • Comment number 49.


    The hard pressed bankers and politician's wouldn never go for that, neither would the elites.

    Just imagine, not that I disagree - your plan has much merit, and represents a first step in real social justice.

  • Comment number 50.

    This story has a long way yet to run it's course. Ever since the near collapse of the financial system last September, the gov'ts of the banking-led economies have been frantically, desperately trying to plug the holes of a sinking ship.

    The insurmountable debt-pile accrued in the last 10 years has not been addressed. As a nation slipping deeper into recession/depression, the UK will not be able to service it's DEBT, let alone begin to pay off the principle.

    These greedy (and now impotent in the face of what their own hubris has wrought) bankers will need many more bailouts in due course (what with waves of US Alt-A options due to expire in the next two years - another fantastic investment our banks are stuffed to the gunnels with).

    I just don't know where it's going to end - there are no adults in the respective gov'ts to stand up and tell us how it is and the changes we need to make to stop it all falling apart.

  • Comment number 51.

    Yes, Robert, the process of getting RBS and Lloyds/TSB back into the private sector is going to be a long one.

    But there is one point that you have not really addressed here, that I'd be obliged if you would spend some time on.

    This further point is in fact THE key paradox we face now as majority owners of two banks, while we contemplate on behalf of the whole UK population the new rules of behaviour we wish to impose on the financial service industries, following the complete mess they have made of their business.

    It is fairly obvious by now that our financial sector needs to be completely overhauled.

    We do not yet know quite what we need to do, but there is no doubt that we need:

    - new capital adequacy ratios (absolutely everyone seems to agree on this one, but the question is of course what ratios, and how do you count different types of capital and etc etc....)

    - new disclosure levels (every person or business that is in any way involved in finance is completely against this of course, because it is the one thing that is going to increase levels of competition, reduce the returns, and ultimately make it harder for them to earn 'easy money'. In the long run it will also be the one thing that will help us as a society achieve a fairer balance between us, the huge majority of the ordinary working people in this land, and the 'money changers' that we absolutely have to have to help us run our monetary system of exchange).

    - potentially new banking structures (i.e. splitting 'people's banking' away from 'casino banking', or, say, putting size limits on banks).

    And all of these measures will of course reduce the levels of return made by any bank, and consequently their share values.

    So the questions for the UK government are therefore.....

    Will it be trying to sell RBS and Lloyds Banking Group back into the private sector before these new regulations are decided and implemented, in order to try to get a better price for them?

    But surely we cannot wait that long to impose new rules on the City?

    In which case, is the government going to allow a concern that it might get a much lower price for these two shareholdings (and consequently suffer a much larger loss for the UK tax payer) prevent it from implementing the sort of new regime that we do properly need if we are to achieve a much fairer society and finally move on from the miserable, debilitating, hopeless belief that we in the UK can only be good at 'financial services'?

    Is Gordon going to impose an easy regime on the City because he is more fearful about those "Billions Lost on our Bank Shares!" headlines than anything else?

  • Comment number 52.

    can someone enlighten me about the Northern Rock "granite" scam? where is the money (70 billion?) who owns it? ...... this was swept under the table when NR was nationalised but somebody must know where the bodies are buried..... and did HBOS, RBS have similar schemes?

  • Comment number 53.

    The only way these banks are going to make money is to "Milk" those people that were NOT responsible and have loans that they can repay. Ie Increasing there margins. Whilst those that took on more than they can pay back will not be even worth chasing for the debt has they have no chance ever of paying it back.

    So the responsible will have to pay for the irresponsible.

    Thachterism was about living within your means Mr Mecabuer.

    For the last 12 years we have had a Party Zanu-Labour that though you can live beyond your means as long as it brought election win after win.

    Which is why brown has no interest in eye his good eye on the City, he just wanted the tax to spend (waste) on buying votes by sovietising parts of the country

  • Comment number 54.

    @25, hodgeey

    I'm afraid the FSA views on it's solvency was a load of hogwash, its capital was accountancy juggling with debt from the short-term debt markets, and it was only ever able to match its requirements via using the Bank of England as lender of last resort. Close to 80% of it's 'assets' were borrowed, *that's* insolvent.

    Any other business with an unviable model like that (it's shares were already trending downwards before the crunch, NR simply had no future without restructuring it's entire business) will find it's lender of last resort shaking it's head and going into administration. NR got a pass from the BoE simply because it was a bank.

  • Comment number 55.

    So can we call our £3,000 worth of shares please and instead of an overpaid quango deciding what happens with our stake we can all vote on what we want RBS and Lloyds to do - call it a revolution!

  • Comment number 56.

    #47. citygambler wrote:

    "Well, the first thing that would have happened is the biggest stock market crash in history,followed by utter chaos of hundreds of thousands of mortgage holders and depositors queuing outside all of the banks branches. Sterling would then plummet on the foreign exchanges, not in itself such a bad thing but it makes investors even more nervous, therefore the markets would continue to fall even further. With most of the Footsie 100 companies shares in freefall pension funds and other institutional investors would withdraw their money and put it into Treasury Bonds, again forcing the market down. Then there is the small matter of x million frozen accounts to which no-one has access until the administrators have had a llok at the books and decided who is entitled to what remained of the assets. Yes, there is a deposit guarantee scheme in many months/ years do you think it would take for any of that money to get back to Ten Million customers. Of course everyone would have to switch bank accounts in order just to get paid (again, do you think that would happen overnight?) and then there are all of the business overdraft facilities that would be wiped out, instantly putting many small firms either out of business or in terrible financial straits. Within a year 'real' unemploymet would be at five million or so..."

    Excellent analysis, citygambler. But there are many regular contributors to this blog who would like to have seen exactly that scenario come to pass in order that they might say "I told you so" and to teach the government a lesson.

  • Comment number 57.

    If these are the losses to the taxpayer now how big will they be if the economy doesn't grow in the next few years?

    Homes and commercial properties still losing value and adding to their woes. Bad loans having to be written off. That's a lot of asset guarantees from the taxpayer.

    It is remarkable to see how the share prices of Barclays and HSBC continue to rise as fully privatised banks whereas the semi nationalised banks remain in the doldrums.

    Lloyds Bank would have probably been in the former now but is counting the cost of its disastrous merger with HBOS.

    I doubt if either HBOS/Lloyds and RBS will ever be sold as a whole.

    Perhaps with Mervyns King's policy of breaking them up will there be any chance of the taxpayere even getting some of their money back.

  • Comment number 58.

    #32 JavaMan1984 wrote:

    You are a disgrace for suggesting Scottish people, delight in British soldiers being killed in action defending the crown. Shame on you!


    If you think our soldiers are defending the Crown...then you are seriously deluded.

    What threat did the Taliban pose to the Crown prior to 2001?

    The Taliban in Afghanistan are a guerrilla army (like the VC were in Vietnam)and will never be defeated by a conventional 'foreign' army.

    This war is about politics...and politics is a dirty business. A dirty business practised by gutless, immoral, spiv politicians who get others to do their fighting.

    In 2001 opium production in Afghanistan was virtually is now greater than it has ever been before.

    Guess which province in Afghanistan cultivates more poppies than all the rest put together?

  • Comment number 59.

    Financial media articles such as this typically come with slick phrases along the lines 'We're all £11Bn poorer' as a consequence of some incompetent trader or banker or equally gormless government regulator's failure to perform. Let's set the record straight-- this is YOUR failure and doesn't touch upon the 98% of competent and capable business leaders one iota. Don't pull us down into your failure-- attempt to triple taxes to subsidise your own incompetence, and you will quickly discover that tax base just moves elsewhere. Maybe when you stop looking for someone to cover your er backsides, you can clean up your OWN mess.

  • Comment number 60.

    58, It was a figure of speach.

  • Comment number 61.

    Either nationalise the banks or police them effectively. There is no other way of saying this - they are a bunch of crooks. A bank is there to serve the workers not the spivs.

  • Comment number 62.

    Post 47 & 56. if the banks are too big too fail then surely they must be broken up into deposit taking and speculative banks with only the former having government protection?

    The bankers were so far up S**t creek last year that they would have taken any deal to keep them in their jobs and the prospect of future bonuses.

    The inability of the UK government to seize the metal and do something bold may have been related to the fact that many of the bankers in charge of the UK banks that failed seemed to have been advising Gordon Brown on either corporate governance, finance or some other point in the recent past.

    After all Gordon couldn't let his mates down could he!

    We will all live to regret this over many years to come.

  • Comment number 63.


    You are probably right; I didn't realise that the FSA were a bunch of liars along with the government.

    Well then, if the FSA resorted to outright lies about Northern Rock's solvency, that makes it even more interesting. Why would they want to do that? Preparing the ground for a sale of the best bits of the book to Tony Blair's new employer?

    Furthermore, it is pretty obvious that the Granite skulduggery was a ploy to shift assets offshore (Granite is still profitable). The whole thing reeks.

  • Comment number 64.

    47 Citygambler

    Not sure I entirely agree with your analysis.

    The BoE/Government had plenty of opportunity to form an orderly takeover of bank accounts to allow for the basics for example - this could have been conducted in several ways. I think a number of commentators both generally and on this blog forget that a number of major banks did not need to be rescued. The market would have allowed them to receive depositors to bolster their balance sheets (allowing for policy guidelines).

    The 'debtor' side of the equation would have required more thought-through with regard to legal position/ring-fencing etc but not impossible to resolve. BoE/FSA/Treasury had already run various scenarios in 2002 in case of this.

    In the case of those with mortgages and so on they would have had to form an orderly queue with another banking supplier. This is how markets work. Yes it would have been messy but nothing as messy and costly as now and will continue to be.

    Remember only Norther Rock suffered an 'ATM rush' because somehow the originator of this blog got hold of privy information that should never have been released. (For example, withness the various orderly building society takeovers of recent months...)

    Also when the stock market/banking shares were in freefall prior to the RBS bailout - the Government had the opportunity to temporarily suspend banking shares (as has happened before) to provide for a window of well-thought out action.

    The Government panicked and has continued to do so everytime - talk about 'rabbit in headlights' - and to think some people were praising GB for his handling - how naively pathetic.......

  • Comment number 65.


    The whole point of Granite was concealment of Northern Rock's assets. You'll never find where the money went - or is going - to.

    All the banks run offshore operations for this reason.

    Further reading at:

  • Comment number 66.

    @ citygambler

    yup your analysis is probably right so why the hell have we ever allowed the banks to be in a position that this could happen.

    I am no financial wizz yet i can see that far too many knew the risks they were taking and did so in the knowledge that we would bail them out.I am also in no doubt that we are far being told the full picture.

    We must IMO make absolutely clear that this should never be allowed to happen again,and that banks will be allowed to fail at some point in the future, time and date to be set in stone.

  • Comment number 67.

    "62. At 2:03pm on 13 Jul 2009, Ian_the_chopper wrote:
    Post 47 & 56. if the banks are too big too fail then surely they must be broken up into deposit taking and speculative banks with only the former having government protection?"

    Of course in the States they had the 2nd Glass Steagall act which pretty much did what you are suggesting, it was repealed in 1999 at the behest of the immensely powerful banking lobby purely so that retail banks could gamble in the same way as the 'investment' banks. Read the justification for the repeal and be careful you don't hurt yourself laughing, particularly at point 3 -

    The argument against preserving the Act (as written in 1987):

    1. Depository institutions will now operate in deregulated financial markets in which distinctions between loans, securities, and deposits are not well drawn. They are losing market shares to securities firms that are not so strictly regulated, and to foreign financial institutions operating without much restriction from the Act.

    2. Conflicts of interest can be prevented by enforcing legislation against them, and by separating the lending and credit functions through forming distinctly separate subsidiaries of financial firms.

    3. The securities activities that depository institutions are seeking are both low-risk by their very nature, and would reduce the total risk of organizations offering them -- by diversification.

    4. In much of the rest of the world, depository institutions operate simultaneously and successfully in both banking and securities markets. Lessons learned from their experience can be applied to our national financial structure and regulation.

  • Comment number 68.

    This all strikes me as stating the bleedin' obvious... The Government had little or no choice in rescuing these banks. I don't see a way to do that at anything other than a loss in the short term. And come the day when it is theoretically possible to exit at a profit it's highly unlikely you'll do this quickly without flooding the market and depressing the value of your holding. So we're in it for the long term. That's just how it is.

    As for Government involvement in the running of these banks specifically, that is obviously a BAD idea. It's banking the Government must reform not RBS and Lloyds. Given that they ran into greater trouble than some of their rivals these reforms may have more impact on them but the Government needs to think industry-wide and resist the temptation to interfere directly in the running of specific banks regardless of any shareholding.

    So I'm 100% with the Government on all that.

    What I'm not quite happy about yet is that the Government is doing enough to reform the banking sector as a whole. Not easily done when many of the problems are not national but international. But vital all the same.

    No bank should be indispensable. We need a future where deposits are protected but banks and their shareholders always face the full risks of the decisions bank leaders take. And no banker should be able to make massive amounts of money without direct and personal exposure to the risks their initiatives generate. They must be forced to endure this exposure for a period that ensures their ideas have proven their worth or their cost.

    Better for the Government to sort out the fundamentals than push for a cheap and early exit.

  • Comment number 69.

    The robbing of the population continues unabated.........Dispossession is the name of the game. They don't want you to pay your mortgage off ever..................instead keeping you on the treadmill once your bankruptcy has lapsed - in time for the next 'upturn' , fake or otherwise.


    Smoke and Mirrors Bloggee.

  • Comment number 70.

    The Government had little or no choice in rescuing these banks.

    However, having done that and given everyone on the planet apart from Crash and Ally realise that this Govt's policies contributed heavily to the credit crunch then the Govt should have resigned and put themselves up for re-election. They'd have lost of course.

  • Comment number 71.

    And how much of these losses were incurred on foreign debt, in other words the British taxpayer subsidising American loans? We should have allowed the American subsidiaries to swing.

  • Comment number 72.

    Well now we know why a pre-budget report will be delayed until much later this year! There's a lot of uncertainty about a potential bonanza that will be spread over several future years.
    At intervals over the next few years, government will be able to top up its Annual Budget with the proceeds of Lloyds, RBS & Northern Rock Bank shares. That extra cash will keep on coming in for quite a long time. Possibly over two or more Parliaments. And our taxes will be LESS because of those sales of investments. And public Investment in schools, health care and the like can be much higher.
    It'll be something of a bonanza for whichever Party forms the next Government. Government debt can be paid off too - just as it was in 1997-2001.
    Maybe, the rival contenders will be able to tell us next Spring exactly what they intend to spend these massive windfalls on?
    That'll be an interesting revelation as Conservatives admit that, after all, there won't need to be public spending cuts because of the Government's wise and timely investments.

  • Comment number 73.

    Talk of the banks being bankrupt is too simplistic. All banks are in effect bankrupt because they borrow short from depositors either retail or wholesale. They then lend it long term. That is the nature of banking. So no bank or building society, however well run. can survive if a substantial group of its depositors turn up and demand their money back.
    If you want this illustrated further I suggest you watch "Its a wonderful life" where the James Stewart Character explains it very well. As otherwise sound banks, and indeed the banking system as a whole, can be brought down by this type of panic reaction by depositors goverments have since the 19th century acted as lenders of last resort.
    In the past these interventions were not made public at the time. Usually only being reported months or even years later when the panic was over.
    But the international disclosure rules have changed and now these actions have to be notified. Which unfortunately for northern rock lead to retail customers panicking and forcing nationalisation. The fact the goverment was forced into such drastic action further fed the panic in financial markets. This is why the goverment was forced to do all the other things to Guarantee the banks.
    But they also wanted to avoid what happened in Japan where banks with large bad debts reduced their level of lending until they had generated enough profits to write off the debts and rebuild there capital base.
    This caused the economy to stagnate.
    So the banks have been forced to raise Capital with share issues so that all the mistakes of the past can be dealt with and the banking system can get back to normal as quickly as possible. So the goverment acted as underwriters for these share issues.
    These actions needed taking for the good of the economic system as a whole. but may not have been entirely interest of the individual banks involved. But the banks knew they were at least partly to blame and that the fundamental requirement for a lender of last resort means even in a capitalist society all banks must give the final word to the monetary authorities.

  • Comment number 74.

    Post 67 thanks for your response. I was aware of Glass Steagall and its repeal though I didn't allude to it in my initial post.

    There is a lot to be said for separation of the two types of banking. Many of the American banks that got into trouble were behemoths built by mergers, often based on unrealistic valuations, caught up in a desperate chase to continue a never ending string of increasing profits and increasing dividends which helped keep up share prices. Much the same, to be honest could be said of RBS and HBOS by the way and Northern Rock's whole business model was based on the continued availability of cheap short term credit.

    Many of the bankers, particularly in the US but also the UK, made huge amounts of money not only from bonuses but also via tax efficient share option purchases. Which relied on increased profts and share prices for them to make their money.

    The fact that many of these profits were illusory and they were in fact building a house of cards dependent on a number of continuing highly inter dependent factors seemed to have passed them by!

  • Comment number 75.

    #47. citygambler's worthy account of financial armageddon. They should have been allowed to fail, but not necessarily all in the space of 24 hours.

    Both British and American governments enjoyed a fair amount of support for their initial steps to prevent armageddon but they needed to follow this up with a policy which would allow the banks to face reality in an orderly fashion. Instead we have breathtaking complacency and appalling self denial or lies that everything's ok now -"the recession is over but the recovery may be fragile" pony.

    It's been a year now and they could all have gone bankrupt during this period without Armageddon. The stock market certainly would have been appropriately revalued but that is not the same as the atm's drying up.

  • Comment number 76.

    How do you default on a tsunami of debt by stealth? Inflation. So, if the money supply is increased 4 fold and we get twice as much for the shares than we paid for them, the government can say "we made a profit for the hardworking taxpayer" whereas in reality the purchasing power of your share has halved.

    Got gold?

  • Comment number 77.

    46. At 12:38pm on 13 Jul 2009, John_from_Hendon wrote:

    "Your view is that the bank is greater than any Nation then?"

    YES - globablised banks ARE bigger than individual nations.

    Stephen Green (HSBC Chairman) stated in a recent BBC World Service interview that banks were "too big to fail in the sense of applying the normal processes of bankruptcy and administration - you can't do that".

    Note that turn of phrase 'applying the normal processes'.

    UK Banks can go into administration and become bankrupt in theory only. In reality, the Government HAS to bail them out.

    Don't you kind of think that if they really could have fallen, even the most reckless would have taken a bit more care? Don't you think it odd that if you wind the tape back 18 to 24 months, you don't get any sense of senior bankers being scared of administration or bankruptcy?

  • Comment number 78.

    For me the wider issue here is that to increase shareholder value, we the shareholder are complicit in helping these banks to shred the cost of labour and make people unemployed.

    This means that we (former shareholders) then have to manage the increased public liability of unemployment benefit, plus the social costs of a disintegrating society.

    I have no doubt we will continue this as we have started, more and more front life staff will be fired to reduce bank costs. We will then need a long time to sell all those lovely shares and while we wait we can increase public spending to offset any potential profits!!

    Or we could hold onto the shares, make them keep the employees on and then over a much longer time consider selling small amounts of the shares at the right time!

  • Comment number 79.

    This Labour Government is trying to face two directions at once with the Banks now bought.

    Brown and Darling make big noises about these Banks " committing" to lending more to small business and individuals for proprty, yet have no legal mechanism in place to force them.

    The Government then insist that the Banks increase solvency and capital rations meaning more money is held back and lot lent. They then insist that these Banks become profitable so that the Tax Payer can get its money back.

    You cannot do these three things at once as they as policies are contradictory. Brown and Darling have used cynical political expediency, in my view to kick all of this into the long grass - but it will not go away, only get worse.

  • Comment number 80.

    re #64 Rugbyprof
    That is far too rational an assessment of the situation, it fails to take into account how the media would report the wholesale suspension of banking shares (for instance). Do you think that kind of news would have people resting peacefully in their beds, safe in the knowledge that the government had everything in hand? No, it would have resulted in a run on deposits that made NR look like a tea party.

    There would have been a domino effect, obviously NR and B&B would have been first to go, followed by RBS and (critically) HBOS..there goes 40 percent of domestic mortgages and 8 million private accounts for a start.The knock on effect woud have crippled Lloyds also. Imagine the chaos in the HR department of somewhere like Tescos or BT when 20 percent of their staff try to change bank accounts for payment due in a week's time?

    Your points about transferring millions of mortgages and bank accounts make it seem as if such a thing is a mere trifle, it would have taken YEARS to sort out..
    Politicians, for all of their faults, seem to have a greater understanding of human nature than ivory tower academics pontificating about theoretical best case scenarios that could never actually happen in the real world.

  • Comment number 81.

    Look forward very much to knowing who was responsible for advising that we initially capitalise RBS at 65.5p per share ( now standing at 36.2p) and Lloyds at 182.5p per share ( now standing at 64.51p).Too much to ask for a full detailed explanation as to why we now own only 84% of RBS and 62% of Lloyds after insurances when it should obviously be a lot more??

  • Comment number 82.

    It's a complete nonsense... since when is NOT taking an activist stance in banks that we own better than taking a passive one.

    Active shareholding v Passive is a false choice.

    Or rather it's a completely illusory choice...... Hester's wonderful skills will make up about 1% of any achieved gain(or mitigated loss) on a sale; and the governments massaging of wider market conditions, tax breaks and what have you will be 99%.

    Why the Government have agreed his pay is completely just can't construct a reason that makes any sense.

    And if they have said it'll take longer to sell these govt owned husks then it will...and you can believe it, because they'd know...not the over-remunerated management who'll be the second last to know what's really going on (the rest of us---the real owners...will be the last to know of course...) for Investment Bankers not wanting to push the sale into an unconditioned market...... don't make me laugh...!!!this market when it forms will be more conditioned than any in the history of snout troughing..... it will be a gold plated, limited edition, silk underwear, go-faster striped, mother of all licenses to make money for Messrs Morgan and Sachs (and Diamond) they'll all share the pain (none) and the gain(much)...I bet they even try and sell it back to us!!

  • Comment number 83.

    The taxpayers may "own" substantial shares in both institutions, but the taxpayers will receive no dividends on this investment. The government, somehow determined to be separate from the taxpayer, will recieve any returns. So it may be more correct to say that the taxpayers have been used as collateral for such loans. Like the nobleman borrowing from the king based on what can be squeezed from the serfs.

  • Comment number 84.

    This is all getting too complicated for me.
    From now on I'm going to keep my money in a mattress under the bed, and my small change in a biscuit barrel in the kitchen.

  • Comment number 85.

    #80 Citygambler

    I did make a point about RBS in my initial comment (#17) not been allowed to fail because of the global implications (like Lehmans) and national implications - would have certainly bankrupted the country...

    Yes - I know the media would hype it up but it still doesn't excuse the fact that BoE/FSA/Treasury knew about the problem and could have been more proactive rather than reactive.

    By the way, far from being in an ivory tower I have a business to run. Incidentally, we did some work with B&B back in 2004/05 and noticed that their business model had changed from deposit taking to commercial wholesale funding (though our project was not directly related to finance)which we saw as a much more risky proposition (US banks in the 80s had done the same thing and become bankrupt).

    We presumed that this was of course OK'd by the powers that be. Of course we were entirely wrong......This was an accident waiting to happen that caught a number asleep at the wheel.

    Though I admit letting certain smaller banking institutions to fail would have been 'messy' the market would have been a damn sight cleaner/better now.

    If you are saying that even a small institution could cause such armegeddon, history from the 70s would suggest otherwise (i.e. our economic resilience is actually somewaht higher)plus recent evidence from the building society industry suggests orderly takeovers where bankruptcy is imminent sa I pointed out in my last entry...


  • Comment number 86.

    #77. Sutara wrote:

    "globablised banks ARE bigger than individual nations."

    Being 'bigger' does not make it 'above' the law, and the law is a nation's law.

    Your assertion ('banks ARE bigger') has a direct implication that Banks must be made to be smaller. They must be made to be be smaller so that individual nations can bail them out or sustain their bankruptcy which is the same thing in its economic consequences in the end.

    It is a falsehood that bailing out a bank is better than bankruptcy for an economy. There is absolutely no reason that this is the case, indeed it can be easily argued that whilst the loss of the bankruptcy is crystallised by a bankruptcy the on-going losses are far more damaging to an economy in the long term and will pull an economy down for decades.

  • Comment number 87.

    As a follow-up to my last entry (#85) Northern Rock and B&B who were effectively sub-prime mortgage lenders, many of those with mortgages would probably have had separate bank accounts (since both of these banks were primarily funded by commercial lending not deposits).

    Also, my consumer finance experience in the 80s showed that due diligence on loan books could take 48hrs to assess. The only downside to another bank purchasing loan books would be the crystallisation of bad debts and therefore potential foreclosures.

    Thus one concludes that Northern Rock, B&B and to a certain extent HBOS were saved for primarily political reasons and not economic reasons........

  • Comment number 88.

    If you see Sid, tell him, he has £3000 invested in bank shares, but he won't be getting a windfall with this one.

  • Comment number 89.

    86. At 7:56pm on 13 Jul 2009, John_from_Hendon wrote:

    "They must be made to be be smaller..."

    Why MUST they? Because you say so? Guess what - no-one's making the banks smaller. Indeed, if anything, the opposite.

    "It is a falsehood that bailing out a bank is better than bankruptcy for an economy"

    It's not an issue of 'better' or 'worse' - bank bankruptcy can't actually be done. You can't apply the normal processes of bankruptcy or administration to these banks.

    Work it out for yourself what Stephen Green was saying...

  • Comment number 90.

    It's time for UKFI to get tough with the banks under it's control on pay of top management

    UKFI should not sell any of the banks till there share price reaches £2.10 pre share
    this would give the tax payer a 6 fold return on the bail out and this also would mean the government can balance the budget at no cost to the tax payer but this requires that UKFI and the government take the shareholding as a long term investment like any other investor

  • Comment number 91.

    It amused me that Mr Hesters bonuses will only come into effect if share price targets were hit over the next 3 years and that this was deemed to be a long term aim. In my domestic financial world 3 years isn't even medium term. It honestly sounds like a quick buck to me!

  • Comment number 92.

    The creation of money should be nationalised, not the banks themselves. Government should create new debt free money in a controlled manner, not the banks by issuing more debt money. Banks can still lend, but only up to the overall value of deposits held within the banking system. Each unit of money held within the banking system could be electronically registered to facilitate this process, and new government money would also be registered in the same way. Suddenly much less debt, less interest to pay, less tax, less inflation and more to spend on public services. Unfortunately the politicians will serve the bankers' interests before those of the public so we will probably persist with the present flawed system.


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