Sell RBS ASAP

Delaying the bank's sale will only end up costing the taxpayer more

Share

What to do with the Royal Bank of Scotland? Nationalised, in effect, five years ago, it was never meant to have spent this long in the public sector and the sooner it is returned to the private sector, the better. The Government should not be in the business of owning a commercial bank. The only possibly reason for it to do so, occasionally hinted at by the Business Secretary, Vince Cable, is if it has an explicit “social” remit. This might include a more lax attitude to lending to small business; providing seed capital for Dragons’ Den-type entrepreneurs as a quasi-National Investment Bank or even fulfilling the sort of role the payday lenders provide to the poorer sections of society, but at more humane rates of interest and a more indulgent attitude to default.

All of those are worthy aims, and would right many social wrongs, but they would not necessarily improve the commercial performance of the bank, and would, in effect, require a continuing taxpayer subsidy to deal with bad debts and other losses involved in doing the sort of business the other banks find too risky. In any case, such an institution would soon fall foul of EU rules on competition. So even if the nation wanted to get itself a “softy” bank, it is pretty much impossible.

Which leaves the purely practical question of what is the best way to move it back to a proper commercial footing in the private sector. Its problem is its “toxic debt”. Some of this debt may not be as toxic as it was – we have seen quite a bounce back in some asset prices from their apocalyptic nadirs a few years ago. Nonetheless, RBS has more than its fair share of such problematic loans and securities. So the question is how to ring-fence this “bad bank” element from the rest of the business, which is making a slow, painful recovery and should have a viable future as an independent financial entity. This “good bank” could be privatised, maybe with a public issue in the manner of Royal Mail, while the bad bank remains  in the public sector until the last of its toxic loans is either paid back or defaulted upon for good. While it winds itself up, this bank would require a taxpayer subsidy, the size of which will depend on how toxic the toxic assets prove to be. That is unfair on the taxpayer, and wrong in principle, but we sold the pass on that when we nationalised the bank in the first place. Sooner or later the taxpayer will take the bulk of the losses, as an 81 per cent shareholder. There is no avoiding that and it is as well to face up to it.

Selling a “good bank” is much more straightforward than trying to sell the current RBS, simply because a sceptical investing community will rightly apply a huge discount to the value of the group because it will take the most cautious view possible of the bad debts it harbours. Thus, the taxpayer is liable to get a lower price for the “good bank” if it is sold as a package with the bad bank than if it were separated out for a clean start. An internal “bad bank” within RBS will never overcome investor suspicion in the same way as two separate entities will.

So the Treasury, with appropriate advice from the Bank of England, should get on with the sale, especially as the stock market is receptive. That it will be regarded as another political success for George Osborne does not, on this occasion, make it the wrong thing to do. It can and should be done next year. We can then put the RBS nightmare behind us, and the grim memory of Fred “The Shred” Goodwin with it.

React Now

Latest stories from i100
iJobs Job Widget
iJobs General

IT Project Manager

Competitive: Clearwater People Solutions Ltd: Our client based in Chelmsford a...

Business Intelligence Specialist - work from home

£40000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

Business Intelligence Specialist - work from home

£40000 per annum: Ashdown Group: An established and growing IT Consultancy fir...

IT Manager

£40000 - £45000 per annum + pension, healthcare,25 days: Ashdown Group: An est...

Day In a Page

Read Next
Nigel Farage has urged supporters to buy Mike Read's Ukip Calypso song and push it up to the No 1 spot  

Mike Read’s Ukip calypso is mesmerisingly atrocious — but it's not racist

Matthew Norman
Shirley Shackleton, wife of late journalist Gregory Shackleton, sits next to the grave of the 'Balibo Five' in Jakarta, in 2010  

Letter from Asia: The battle for the truth behind five journalists’ deaths in Indonesia

Andrew Buncombe
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?
Ed Sheeran hits back after being labelled too boring to headline festivals

'You need me, I don’t need you'

Ed Sheeran hits back after being labelled too boring to headline festivals
How to Get Away with Murder: Shonda Rhimes reinvents the legal drama

How to Get Away with Murder

Shonda Rhimes reinvents the legal drama
A cup of tea is every worker's right

Hard to swallow

Three hospitals in Leicester have banned their staff from drinking tea and coffee in public areas. Christopher Hirst explains why he thinks that a cuppa is every worker's right
Which animals are nearly extinct?

Which animals are nearly extinct?

Conservationists in Kenya are in mourning after the death of a white northern rhino, which has left the species with a single male. These are the other species on the brink
12 best children's shoes

Perfect for leaf-kicking: 12 best children's shoes

Find footwear perfect to keep kids' feet protected this autumn
Anderlecht vs Arsenal: Gunners' ray of light Aaron Ramsey shines again

Arsenal’s ray of light ready to shine again

Aaron Ramsey’s injury record has prompted a club investigation. For now, the midfielder is just happy to be fit to face Anderlecht in the Champions League
Comment: David Moyes' show of sensitivity thrown back in his face by former Manchester United manager Sir Alex Ferguson

Moyes’ show of sensitivity thrown back in his face... by Ferguson

Manchester United legend tramples on successor who resisted criticising his inheritance
Two super-sized ships have cruised into British waters, but how big can these behemoths get?

Super-sized ships: How big can they get?

Two of the largest vessels in the world cruised into UK waters last week
British doctors on brink of 'cure' for paralysis with spinal cord treatment

British doctors on brink of cure for paralysis

Sufferers can now be offered the possibility of cure thanks to a revolutionary implant of regenerative cells
Ranked seventh in world’s best tourist cities - not London, or Edinburgh, but Salisbury

Lonely Planet’s Best in Travel 2015

UK city beats Vienna, Paris and New York to be ranked seventh in world’s best tourist destinations - but it's not London