Outlook: The market has greeted allegations about RBS with relative equanimity

 

Outlook Is Derek Sach going to get a share of the £500m Royal Bank of Scotland is preparing to pay out in bonuses this year? It's an interesting question.

The bank is under no obligation to say. The head of the Global Reconstruction Group (GRG) isn't on the board, after all. But it's a legitimate question to ask.

Here's the answer: He will get paid, assuming that he and the GRG have performed well against the targets that they have been set.

That will only change based on the findings of one of a plethora of investigations (when clawback could in theory come into play). First off there is the senior approved person appointed by City regulators in the wake of last week's reports into the bank's treatment of small businesses produced by the government adviser Lawrence Tomlinson and Sir Andrew Large, the former deputy governor of the Bank of England.

The Serious Fraud Office is also in there, and the tax authorities are taking a look. You'd have thought all this would have produced something of a reaction from the stock market. But interestingly it hasn't.

RBS has under performed fellow state-backed bank Lloyds by a bit over the last week while Barclays has motored ahead of both of them. But while the shares have wobbled, their performance hardly suggests that investors have come down with a serious case of the jitters.

Markets are supposed to over-react when faced with the slightest bad news. They're held to view any sort of uncertainty as investment Kryptonite.

And yet so far they've treated last week's revelations with relative equanimity. This despite the fact that Mr Tomlinson's central allegation – that RBS tipped viable businesses into insolvency with the intention of turning a profit from sorting out the mess – is explosive. And potentially hugely costly if true.

Perhaps the market's reaction is probably informed by the view that while RBS may have behaved badly that doesn't necessarily mean that it has behaved illegally.

Perhaps the City is just hoping for the best because if the worst is true it simply doesn't bear thinking about.

But could the real reason be that the market doesn't sense all that much political will to push this one too hard, in stark contrast to the situation at Co-op?

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