ALEX BRUMMER: The end game nears for RBS after 10 years of disastrous public ownership
How remarkable that almost a decade after the financial crisis the Government still holds a 71 per cent stake in the Royal Bank of Scotland.?
Cowardice by Chancellors, afraid of the political fall-out if shares were sold at a loss, has left the taxpayer ever poorer.
The cost of bailing out RBS is far beyond the initial injection of ￡45.8billion by Gordon Brown’s government.
The longer the bank has been held on the Government books the higher the financing costs, now put at ￡12.1billion, have become.
Money pit: The cost of bailing out RBS is far beyond the initial injection of ￡45.8bn by Gordon Brown’s government
Even worse has been the political shadow of state ownership.
The Government has suffered the slings and arrows of disgraceful bonus payments made to top executives and investment bankers. It also has rightly shared blame for the Global Restructuring Group fiasco which is far from over.
The over-enthusiastic way in which GRG put many small firms into bankruptcy and grabbed assets for itself was highway robbery. This unedifying spectacle is about to enter an endgame.
The Budget Red Book pledges to recommence the sale of shares in RBS in 2018-19. Chancellor Philip Hammond looks ready to absorb the red ink if necessary. This may be realpolitik more than anything else.
To leave RBS in Government hands with Shadow Chancellor John McDonnell outside Number 11 Downing Street would be an act of foolhardiness.
Just as RBS is starting to purr again it would find itself in the hands of Left-wing extremists determined to turn it into an instrument of the state.
I have long taken the view that RBS should have been restructured and initial tranches of shares sold, even at a loss.
That would have been a small price to pay for running down the financing costs and restoring a genuine free market in the shares. The whole episode tells us why public ownership of substantial commercial assets ends up as messy as a bread and butter pudding.
Last time the Bank of England directly interfered in governance at a City firm was when Mervyn King summoned chairman Marcus Agius and senior non-executive Mike Rake of Barclays in July 2012 and ordered the sacking of chief executive Bob Diamond over Libor rigging.
The suggestion by dissident shareholder TCI that the Bank or Financial Conduct Authority step into the row at the London Stock Exchange is therefore not without precedent.?
The LSE sits at the heart of the City and its derivatives-clearing arm LCH Clearnet handles trillions of dollars of transactions each week. Indeed, regulatory risk was among the reasons why the burghers of Frankfurt were reluctant to support the Deutsche Boerse merger with the LSE.
The pitifully slow response of the LSE to the assault on its chairman and board, and the decision to dispense with the services of chief executive Xavier Rolet clearly involve systemic risk.?
Letting the clock slowly tick towards a circular and an extraordinary general meeting ought not to be an option.
The LSE reportedly has lined up its finance boss David Warren as a temporary replacement for Rolet.?
It should not be difficult to parachute in an alternative chairman, such as non-executive David Nish, to replace Donald Brydon.
When the chairman of the Stock Exchange has to scare up a round-robin letter to the FT from friends to defend his position, you know he has lost the plot.
Among those defending Brydon is Moya Greene, chief executive of Royal Mail. She seems to forget that her company’s privatisation, led by Brydon, was botched and criticised by the National Audit Office.
The City authorities need to give Brydon and Rolet marching orders, to end one of the ugliest City battles of recent times.
Credit must go to the Communities Secretary Sajid Javid for forcing the hand of the Chancellor on Britain’s housing crisis.
Philip Hammond has been deeply sceptical of any reforms that might incur the wrath of Tory voters fearful of development in their own backyards which might destroy rural views, strain resources and potentially hurt values.?
The Government looks to have taken Javid’s proposals for building close to suburban transport hubs to heart.
The measures may fall short of his bid for a ￡50billion housing fund but have set the cause on a much better trajectory.
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