As Royal Bank of Scotland (RBS) and Lloyds (with HBOS) went round Go to collect a combined £37 billion of recapitalisation funds – courtesy of the hard-pressed taxpayer – it was inevitable that, one day, payback time would arrive.
Due primarily to EU pressure, RBS is now being forced to dispose of hundreds of its branches and its two high-quality insurance businesses – Churchill and Direct Line. Lloyds, too, has not escaped: its Cheltenham and Gloucester franchise is to be sold.
And why, pray, has the unelected Dutch bureaucrat, Neelie Kroes, become the key player in restructuring the UK banking sector, which is seeking new high quality entrants, such as Tesco, Virgin and Spain’s BBVA?
What has raised eyebrows, though, is the staggering amount of money involved. In Lloyds’ case, there is good news since a heavily discounted rights issue will enable it to exit the Government’s Asset Protection Scheme (GAPS).
Originally, GAPS was planned to cover toxic liabilities of £585 billion. With Lloyds now exiting, the new £282 billion figure is wholly attributable to RBS.
To reduce GAPS’ liability by over 50% is to be welcomed – unwinding GAPS was one of the ‘Ten Economic Priorities’ identified in an ASI publication last May.
The level of financial support for RBS defies belief. Following the latest announcement, the total figure – a financial record-breaker - is a staggering £53.5 billion, including the £8 billion recapitalisation option. It puts into perspective the subsidies controversially paid to British Leyland all those years ago.
As such, the Government’s stake in RBS would move to 84%, with financial support being close to £1,000 for each UK person.
Moreover, RBS is not out of the woods yet - its share price continues to fall following the EU’s rulings.
Those responsible for RBS’ unbelievable plight bear a heavy burden. How will history judge them?
