Taxpayers hit for £28.7bn more amid banks break-up
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Independent Minds
Taxpayers were hit for at least another £28.7 billion today as two state-backed lenders unveiled break-up plans on a seismic day for the UK banking sector.
Royal Bank of Scotland and Lloyds Banking Group will have to shed more than 900 branches to ease European competition concerns over the vast state support given to them in the past year.
The disposals - which could take up to four years - will put around 10 per cent of the UK retail banking market up for grabs for smaller players or new entrants.
The banks' £39 billion lending commitments to homeowners and businesses remain unchanged while they have had to agree to new rules on staff bonuses to secure the extra billions being pumped in.
Taxpayers have already paid out £37 billion for shares in the two banks since the crisis began although Lloyds paid back more than £2 billion in the summer.
RBS - which will also have to sell its Churchill and Direct Line insurance arm as well as parts of its investment banking business - is putting £282 billion in toxic debts into a taxpayer-backed insurance scheme.
Lloyds is paying £2.5 billion to avoid the scheme but the Treasury is shelling out £5.7 billion to support a record £13.5 billion rights issue launched by the bank, which will remain 43 per cent state-owned.
The bank has been able to raise the funds due to a "stabilising" UK economy but has 2.8 million private shareholders who will not receive dividends for at least two years.
Chancellor Alistair Darling said the plans would increase competition and represented a "better deal" for the taxpayer.
The taxpayer's potential exposure has been cut by more than £300 billion mainly due to Lloyds pulling out of the Asset Protection Scheme.
But Shadow Chancellor George Osborne said: "There is still no guarantee that today's plan will get credit flowing in the economy."
The pair will not pay discretionary cash bonuses to any staff earning above £39,000 for 2009 - although deferred shared bonuses will still be paid.
Lloyds chief executive Eric Daniels said: "Rewards have to be taken over the same sort of timeline as the period of risk."
But unlike Lloyds, RBS boasts a significant investment banking business where huge payouts have long been the norm.
Chief executive Stephen Hester said the bonus restrictions was "one of the additional obstacles that makes our job of recovering money for the taxpayer more difficult... although I completely understand the rationale for it".
Lloyds will sell at least 600 branches, or about 4.6 per cent of the total market share of UK current accounts, taking its market share to around 25.5 per cent. But it avoided tougher sanctions by pulling out of the APS.
RBS is selling 318 branches of the former Williams & Glyn's outlets in England and Wales and its NatWest branches in Scotland.
These represent 14 per cent of its UK network and will reduce its retail market share by 2 per cent. Its share of the small business banking market will fall by 5 per cent.
Unite warned that up to 25,000 jobs were at risk because of the Government's plan to sell off parts of the banks - and called on ministers to save jobs rather than securing the best price for the banks' assets.
National officer Rob MacGregor said: "We cannot allow a situation to arise where some 25,000 loyal workers in bank branches in high streets and towns across the country are made to pay the price for the banking executives' recklessness.
"Any potential buyers should be assessed on their commitment to job security and protection of terms and conditions, not short-term profits."
Meanwhile the taxpayer is already around £10 billion down on its current stakes in the banks. RBS tumbled 10 per cent today although Lloyds edged higher on news that its bad debt issues were easing.
Hargreaves Lansdown equities analyst Keith Bowman said the sell-offs were potentially good news for UK consumers although "the story of the banks is far from over".
"Suggested disposals have now to find buyers prepared to pay acceptable prices to both shareholders and taxpayers, whilst taxpayers still remain substantial owners of banks - a position inconceivable just a few years ago," he added.
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Comments
I welcome diversity and the increase in competition here but I think the point is being missed. Ordinary people are becoming more than ever reliant on banks and lenders.
Therefore could easily become victims of businesses, who's sole aim is to make vast profits.
Perhaps a return to the old building society type of mortgage business could be a better idea. Particulary as the public already own a huge slice of these banks.
I suspect caution is being thrown to the wind in order to re-coup heavy lending of public money, an approach which will haunt borrowers in years to come.
Well the Abbey National changed to a plc in 1989. And by 1997, seven major building societies had followed suit.
For a bank that at least tries to be for the benefit of its customers and operates as best an ethical business model as it can, the best one in the UK is the Co-operative Bank.
http://www.goodwithmoney.co.uk/ethi
Well done, woolard1!
This is an announcement to make it appear (pre-election) that the government has achieved a return for taxpayers from the bailed-out banks. Nothing of the sort - it's premature, and doing it under cover of it being imposed by the EU is very handy. The additional £30bn is yet more to add to the national debt because it will be borrowed; the further potential £8bn for RBS is yet another contingent liability for the taxpayer; and RBS won't be an attractive purchase for at least 2 years, probably more, after the taxpayer has taken the write-offs necessary to sell it off on the cheap.
Very generous of the over-£39,000 employees to defer 2009 bonuses until 2010 - that's just 6 weeks away. Spin. And what about the 3,700 cashiers who will lose their jobs in RBS's branches? Leaving aside the obvious personal costs, that will be a saving of perhaps £90m but with a redundancy cost of £90m-plus, funded by the taxpayer yet again to the benefit of the eventual purchaser who will buy a bank that will still be too big to fail. Greed, greed, greed - the more senior people should be taking a pay/bonus freeze or cut, because if these banks hadn't been bailed out they would be unemployed, like many of their customers.
Rant over - election please.
Though I can't help but wonder if the bonus pool for that year will be 3 times higher than normal to make up for the years of deferred bonuses. They should just declare a bonus pool of £0, whilst they are public owned.
Hmm. To be precise, the Treasury announcement http://www.hm-treasury.gov.uk/press_99_
"both banks have agreed:...
Not to pay discretionary cash bonuses in relation to 2009 performance to any staff earning above £39,000;
In addition executive members of both boards have agreed to defer all bonuses payments due for 2009 until 2012, to ensure that their remuneration is better aligned with the long-term performance of their banks;"
So people earning over £39k will be getting bonuses accruing again in just 8 weeks time (my only mistake was that I said 6 weeks time!) in 2010, and only the board executives wait until 2012. And in fact if the Treasury is correct then board members will then get payments for 2009 as well. God knows what formula they use to calculate that....0 x 30% or whatever is still 0.
If it goes wrong, it's half a trillion in just two of the banks according
to this article.
The banks have assured H.M.G that the money is retrievable and
government a have looked at this is detail, so thats that, then,
isn't it.
So believe , you have to believe that bankers don't hide, or fudge
or con.
Yup, I would make a great dictator!
A brief look at John Law and th Mississippi company will reveal the Alice in Wonderland nature of the public finances.
Whie the executives can be taxed on bonuses the counter staff are cmpliant.They must have realised 6 times income to the NINJA
no income no job and 100 year investment mortgages were imprudent.
In my youth 2-2.5 income plus a deposit and savings over a set period typical 2 years was the way to get the Abbey Habit
If the public is to take all the risk should control the bank .
This could be done by splitting big ones into regional players as in other nations.
If a city of speculators is so precarious it can endanger life savings pensions and the entire state's debt perhaps it is a poisened chalice.
As they used tosay of the navy but try it as as one off windfall utube event
'HANG A BANKER TO ENCOURAGE THE OTHERS"
Name to be drawn by lot from all thiose in receipt of bonus.
The immoraity of thee types and the MPs and regulators calls for condemnation
Whee are the Bishops too busy watching Rosso porn or anointing priesteses
The road to Hull is prescotted with good intentions
The one they did before?
Incompetence to the fore good old Brownie puts HBOS/Lloyds together at a high cost and then takes it apart.
This is not the end there are still more write downs to come ,so expect Brown/Myners and Darling to do another save the banks tour again.
The big question is why we have had to spend more than anyone else? why other countries banks are repaying and we are lending more.
Good news the Indian central bank is buying gold at 1040 an ounce now what did we sell ours for?
How can a dead-duck government make all these UK shattering decisions when in 6 months they will be nothing more than a bad dream?
What next, Agent Orange dropped on Hyde Park?
Even Hitler kept his gob relatively shut when he realised that his end was near.
When did we allow Labour to adopt a scorched Earth policy?
take the following as an example,
http://www.justice.gov.uk/publicati
For the last two years (of data) there has been an average of 20,000 reposessions per year (which must be factored into the bank's business plans and lending policies); this year they were suggesting that there could be 60,000; i.e an increase of 40,000.
Taking the average UK house price at £165000. Say the average deposit is 10% this means total risk on mortgage lending (with an increase of 40,000) is £5.94 billion without factoring in the repossession itself and say re-sale at 1/2 its value (it would probably achieve more at the moment in a market starved of properties) - i.e. £88,000 = £3.5 billion THEREFORE:-
NET LOSS from so called 'Sub Prime Lending' at worst £2.4 billion. bear in mind property prices are also rising again so this 'loss' will be less than this.
So TOTAL UK BANK BAILOUT estimated at £400-500 billion
http://news.bbc.co.uk/1/hi/business/765
Add another £30 billion for today's news!
SO can someone please explain to me what has happened to the other £400 odd billion. We were all fed the lie that this was because of SUB-PRIME....but that clearly is NOT TRUE!!!!!
We are paying for the selling off of 'fictitious assets'; i.e. securitization; i.e. off-loading the risk; and off loading the risk; and off loading the risk etc. etc.
....Coupled with a fraudulent financial system based on the fractional reserve system that has allowed banks to lend (traditionally) up to 9 or 10 times as much as they have deposited in central banks.
Clearly if there is a crisis in one part of this horribly interlinked machine, the rest of the 'house of cards' comes tumbling down as everyone clamours to get repaid money that simply did not really exist (other than on paper). But someone has to pay this money and that is the poor tax payer for some reason.
And any amount of bailouts has not changed the actual banking system which is operating just as before, with as much risk of the whole thing collapsing once again at some time in the future, with the poor tax payer again at risk of having to pick up the burden again!
FRB is a necessary part of modern banking; it was also necessary to impose realistic reserves (0% in some categories) to prevent the pyramid collapsing.
The people who bail them out are the ones with savings; they should be protected as the whole capital system depends on them. Instead the gamblers and spenders are protected.
A complete rebuild is needed; when the real recession and subsequent depression arrives - quite soon now - changes will occur and it will not be a pretty sight.
We are being royally screwed here by the government and it makes you wonder what grubby deals, backhanders and bribes allowed Darling to hand over another 28 billion pounds, money that we can ill afford to launch a scheme that will see us ripped off once again.
A wise and just government would have used this opportunity to break the bank's stranglehold on this country but New Labour are just as corrupt as the Conservatives that handed that power over us to the banks...
Shame though that its all a moot point really... we have had the first dunking by what they thought was the recession... what they are failing to see over the horizon is the huge tidal wave heading our way, our government and the banks really do think they can spin and propagandise themselves out of a recession without addressing one issue of causes and effects... Think again New Labour.