Don’t sell RBS before sorting it out


       There are rumours that the government is thinking of selling a portion of its RBS shares at a loss. The danger of doing this is it will make it much more difficult to sell it off in pieces later, so we will not get the boost to competition and a better structured banking sector we could get if only the government would require RBS to split itself up. UKFI should not allow or encourage the management to do this. Taxpayers deserve a better banking industry for all the money they have been forced by the previous government to tip into it.


  1. Daedalus
    March 27, 2012

    Absolutely right yet again Mr Redwood. The government may well need the money; but if it cut its cloth to suit its income then maybe, just maybe, we will be in a position in 5 or 8 or even 10 years time when we can not only get the tax payers money (OUR) money back but a fat premium as well.


    1. lifelogic
      March 27, 2012

      Indeed they should break it up and sell the bits of to the best bidders and get the UK business lending bit sorted so it can lend again.

    2. Susan
      March 28, 2012


      It depends really on whether this decision to sell RBS is purely political or the Government genuinely believe that getting RBS off their books early is better value in the long run.

      Any Government for political reasons would want RBS sold off as quickly as possible so they no longer have to take the flak for bankers bonus payments and explaining losses for what is effectively a state owned bank.

      My feeling is that RBS is a complete Albatross hanging around the neck of the tax payer. I do not believe it should have been bailed out in way it was and I do not think we will make money out of it certainly not in the short term.

      1. uanime5
        March 28, 2012

        Perhaps the fiasco regarding RBS bonuses and the calls for the Government to sack the board for awarding such large bonuses for failure is why the Government has decided to sell RBS. After all they don’t want to be seen capping City bonuses or rewarding failure.

  2. Bob
    March 27, 2012

    Who are the people who actually make these decisions?
    Do they have any business acumen at all?

    I guess they’ll spend the money raised on funding more foreign aid or other current account expenditure.

    1. Andy Man
      March 27, 2012

      Who are the people who actually make these decisions? Bureaucrats who are unfit and unwilling to do any productive work at all.
      Do they have any business acumen at all? No.
      I guess they’ll spend the money raised on funding more foreign aid or other current account expenditure. Yes.

  3. alan jutson
    March 27, 2012

    It’s only a rumour, or is it ?

    Given the current list of debacles, “U” turns, policy changes, spin, and incompetence, anything could be true.

    1. alan jutson
      March 27, 2012

      The government needs to get its act together fast, and at the same time be honest with the population about the true state we are in, and give a true state about progress being made.

      Thank heaven for your daily blog John.

      1. A Different Simon
        March 27, 2012

        By trying to keep the electorate in the dark all they have achieved is to ensure that the blame will laid at their feet when the day of reckoning comes .

        This is a hopeless Govt and it’s time for Cameron to do the decent think and admit that he isn’t up to the job .

        We would have been better off under Labour .

        Not as Europhile as the Tories either .

  4. Nick
    March 27, 2012

    It’s a fire sale.

    Now, what do you know that we don’t?

    For example, have you seen the financial statements of UKFI, because that was made a state secret. They are exempt from FOI.

    In particular, what we need to know is what interest was paid and when on the loans, and what premiums were paid on the guarantees. Otherwise you can’t tell whether or not there has been a loss or a profit.

    As for deserving things, it doesn’t work that way. The loss is a loss. That happened as soon as Brown gave money to plonkers.

    What you need to do is deal with that (word left out-ed) Vince Cable. His ideas are a UK investment bank. More losses for Joe Public. ie. Give lots more tax payers money to the RBS numpties to invest. It’s not as if they have a track record of success is it?

    The other observation, is that its a fire sale. Couple this with the Post office pension, and its a need to get immediate cash, at the expense of long term debts, preferably hidden off the books.

    That tells you that you’re bust. The Greeks have it right. They have cut the state out of their lives and they will be better of as a result.

    1. APL
      March 27, 2012

      Nick: “His ideas are a UK investment bank”

      ‘Investment’ in this context is the political elite talk for an absolute stinker of an investment.

  5. JimF
    March 27, 2012

    I totally agree.

    This bank has received support from the taxpayer both directly and via the differential between interest paid and received in a less than competitive market.

    The taxpayer deserves better than this and I, for one, will continue to boycott this bank until it is either broken up into competitive chunks or nationalised entirely and turned into a National Savings and Loans organisation which serves the nation as a whole (as PostFinance in Switzerland).

    Enough is enough.

  6. Ferdinand
    March 27, 2012

    Absolutely right. RBS should have been broken up into its constituent parts at the outset leaving the profitable parts to continue and coralling the bad investment banking to its devices.

  7. Alan Wheatley
    March 27, 2012


  8. zorro
    March 27, 2012

    I suspect that they may have read some of your blog posts and misunderstood them when you talked about the state getting rid of RBS and breaking it up into competing banks. The might think that selling it off as a monolith and at a loss to the taxpayer a good idea, but then there’s no accounting for taste…..


  9. Trimperley
    March 27, 2012

    Hold on a minute, you have spent the last few years arguing that the nationalised banks should be sold off.

    Reply: And still do, but I want it sold off in bits, not as a loss making whole.

  10. stred
    March 27, 2012

    Matthew Hancock was interviewed by J.Paxman about this last night. I have rarely seen a less convincing performance. He reminded me of someone depending on Wonga. How this junior politician has become an advisor to the Treasury is difficult to understand. I never sell shares when they bottom out and hold on until they come up again. In this case HMG is in an ideal position to force a a restructuring and make an asset sale of a large unwieldy mess.

  11. Andy H
    March 27, 2012

    The biggest question here is why? Is this because the EU have mandated this, as was the case with Northern Rock, and who will get the undervalued asset?

  12. Anoneumouse
    March 27, 2012

    Neelie the EU elephant

    “But be aware that in case RBS does not deliver on its balance sheet reduction targets by 2013, the Commission will be able to intervene again and more divestments will be required”.

    Article 107(3)(b)
    European Union Competition Commissioner Neelie Kroes
    Brussels, 14 th December 2009

    1. APL
      March 28, 2012

      Anoneumouse: ” .. the Commission will be able to intervene again .. ”

      Isn’t that odd! Mr Redwood has managed to discuss a domestic topic of interest to UK tax payers without mentioning the European Union.

      So, lets add it to the list:
      Road tolls, HS2, government contracts to companies (Seimens) that exclude British based employees (Bombadier), and now the decision to sell or not to sell a defunct but nationalized British bank.

      This article is succinct in its brevity, but curious in that Mr Redwood, a lifelong member of the British political class doesn’t believe the EU worth a mention in this context.

      Thus is the EU kept out of british domestic political scene.

      Reply: I am always willing to criticise EU powers or interventions when relevant and vexatious. Quite what do you think the EU is doing wrong on RBS? The UK government can decide whether to sell or not, when and how.

      1. APL
        March 28, 2012

        JR: “Quite what do you think the EU is doing wrong on RBS?”

        Sticking its nose in!

        But you can hardly claim it isn’t a topic that might engage the British public, especially since they have been forced into hoc to pay for the error of the original management. Now it seems we will be forced to take a huge loss on the so called investment because the EU is pulling the strings behind the scenes.

        That must be a legitimate topic for domestic political discussion? It is clearly a matter of public interest.

        Unless the intent is to make it look like a British government decision rather than an European Union decision.

        Reply: Why do you think it is an EU decision? I have never been told it is when discussing it, and they have never used the EU objection to any proposal I have floated.

        1. APL
          March 28, 2012

          JR: “Why do you think it is an EU decision?”

          Why don’t you ask Neelie Kroes? According to her as quoted above, the EU has already intervened over RBS once, and stands ready to intervene ordering more divestments.

          Totally out of the blue, and utterly unconnected, the British government turns tack on RBS and instead of hanging on to the stock for the long haul, decides to divest itself of a portion of its holdings ‘at a loss‘.

          JR: “I have never been told it is when discussing it .. ”

          That would permit you to plausibly deny any knowledge of an EU connection, because as you haven’t searched for it, you won’t find it.

          Yet the EU commissioner her self informs us the EU has already intervened over RBS, and will do so again. But our MPs plead ignorance of the EU dimension.

          Thus does the political class keep the British public uninformed about the extent to which almost every aspect of domestic policy has an EU dimension.

          They can then plead later, the EU is not an issue in British domestic politics.

          It isn’t because the domestic politicians want it that way.

          Reply: Not this MP. I am always keen to expose undue or unwanted interference in our affairs by the EU. The divestment of branches under EU competition laws was a well known intervention with UK banks. I agree with what was done ,though not by the origins or means. Current policy over sale of shares does not raise EU competition issues, unless they tried to sell the shares to an exisiting large EU bank where I trust the EU Competition authorities would veto it.

          1. APL
            March 29, 2012

            JR: “where I trust the EU Competition authorities would veto it.”

            You seem to have utterly missed the point.

            Why are the EU interfering in a matter of domestic British interest, when we have overpaid MPs (who are clearly trying to stay clear of anything to do with the EU ) and a huge civil service – Competition commission or what ever they are called these days.

            Just sitting there taking orders from Brussels.

            We either take instructions from Brussels, in which case you lot can just go home and no one would miss you.

            Or we have our own government our own civil service that implements government policy.

            We don’t need to pay twice for both.

            Either govern us or resign. The lot of you.

  13. Alan Wheatley
    March 27, 2012

    I hear it being argued on TV and radio that the government should not sell RBS shares at a loss. These people seem to think that the upside is for sure and any risk of the downside is so slight as to be not worth mentioning. If this is indeed so then surely the RBS shares at their current price are a steal? Presumably the market as a whole do not agree, else would not the shares be higher than they are?

    This illustrates a dilema for government owning shares in a company listed on the Stock Exchange. It would also seem to reinforce JR’s point made several times on this blog that buying RBS was the wrong solution.

    1. A Different Simon
      March 27, 2012

      When those shares are eventually sold , do you think anyone will be stupid enough to claim publicly that the British taxpayer has actually made money out of this fiasco ?

    2. APL
      March 27, 2012

      Alan Wheatley: “I hear it being argued on TV and radio that the government should not sell RBS shares at a loss.”

      Better never to have bought them in the first place.

    3. Bob
      March 27, 2012

      The market is not stupid. They know that the govt are itching to offload.
      The govt should put the shares into the bottom drawer for a few years.
      Better still, they should follow John Redwood’s advice.

      Selling as is would be a silly mistake, which would not be a first for the coalition government, far from it.

  14. sm
    March 27, 2012

    Too big too fail = break them up or close them down.

    1. sm
      March 28, 2012

      Given all the indirect & direct subsidies from various governments and central banks. It always will be a loss for the (state or states or taxpayers) or customers paying increased margins.

      For a taxpayer and citizen the notion of a profit is largely one of political central bank manipulation at the industry level.

      JR is right to insist on the over-riding strategy must be a competitive banking landscape furthering economic stability and prosperity. Adding value via intermediation and serving its customers well.

      If RBS has its will in place that might be a front runner, if management don’t present better scenarios for HMG to exit. Where the outcomes must surely be for the public economic good, not potentially vested interests.

      I hate to say this but the EU may not be the dark side here.

  15. A Different Simon
    March 27, 2012

    Cameron doesn’t appear to accept that his responsibility is to the whole electorate , not The City .

    After all the talk of Glass Steagal , splitting banks up and creating real competition we’ve regressed to B.A.U. ; “To big to fail” and junk rhetoric about ringfencing .

    Why is it that other industries haven’t been stimulated to rebalance our economy thus making financial services a relatively smaller piece of our economy ?

    The financial services industry should never be the biggest fish in an economy .

    Why is it that selling the problem on is seen as an alternative to sorting out a problem which will likely come home to roost with it’s hand out within a decade .

  16. James Sutherland
    March 27, 2012

    Buying it in the first place was indeed a mistake, but selling now does not reverse that. Now, selling some *bits* of it – particularly intact overseas components – makes a great deal of sense, reducing the UK’s losses and exposure and/or providing the necessary balance sheet reduction and funding to restructure the remainder.

    Were I more optimistic, I might hope this to be a case of Chinese Whispers: not selling part of the shareholding, but selling part of RBS itself. Too much to hope for, I suspect.

  17. a-tracy
    March 27, 2012

    If George Osborne does this he won’t be able to remark about gold sales ever again that’s for sure, it will be his Brown moment.

    Why didn’t RBS go into administration and the good bits sold off, how much would it have cost the government to bail out all the depositors and how much would it cost the revenue to sell at such a loss?

    1. APL
      March 27, 2012

      a-tracy: “If George Osborne does this he won’t be able to remark about gold sales ever again that’s for sure, it will be his Brown moment.”

      Nah! this is Browns second moment.

      That, don’t forget is the man paid to represent the hapless folk of some god forsaken constituency north of the border and has turned up to the commons since the election, how many times? four?

    2. A Different Simon
      March 27, 2012

      There will be a lucrative directorship waiting when he’s booted out of office though .

    3. lojolondon
      March 27, 2012

      He will, because Brown put the money in and agreed the EU terms quoted above – same as Northern Rock selloff terms – all bad for UK, but Osborne is tied down (short of supporting an EU referendum!!).

  18. forthurst
    March 27, 2012

    Sometimes headlines provoke interest rather than the usual. Sometimes those that provoke interest also provoke an emotional response, positive or negative. This ‘initiative’ is well into the negative territory of anger and contempt. The Bully boys are not up to the job: gay marriage and the other paraphenalia of the Frankfurt school are designed to wreck our culture not salve us. They are completely clueless, still in short trousers.

    1. forthurst
      March 27, 2012

      and still on the same subject…

      Headline in todays’s FT: Women bankers riskier – Bundesbank study:

      “Board changes at banks that result in a higher proportion of female executives “lead to a more risky conduct of business”, concluded the authors of an extensive study of German finance houses released by the country’s central bank. They also find that younger executive teams increase risk-taking – but more PhDs in management suites have the opposite effect.”

      Can iq or experience really cap (gender-ed)? Surely not?

    2. zorro
      March 27, 2012

      I have an idea – if they want to reduce the deficit, why don’t they get someone to sell access to the Prime Minister to rich companies or individuals and use the proceeds to pay off the deficit in the national interest. I mean, it’s not as if the money would be used for any other reason. It’s a bit like Comic Relief, except that you could call it Government Relief. That’s the trouble you see, not enough blue sky thinking!


      1. zorro
        March 27, 2012

        Note to self: – reconsider career in PR….


  19. Neil Craig
    March 27, 2012

    Selling a portion of the shares would make it more difficult for government to allow politics to overrule economics in the management of RBS. Since this is the major risk and one that both Labour and Mr Cable are always pushing for, I will be happy if the do this. Indeed I would quite happily turn government’s role into a “golden share” position where they do not interfere at all.

  20. David John Wilson
    March 27, 2012

    As we are RBS shareholders surely this proposal should be the subject of a referendum!

  21. RDM
    March 27, 2012

    For what it’s worth; I totally support you on this.

    But, if we don’t get a more competitive Banking system, after all we have been through, then not only have we learnt nothing, we are stuck with a highly concentrated Banking systems! This mite suit some peoples’ (structured, Top-down) view of the world, but it does nothing to support Britain and the British!



  22. Lindsay McDougall
    March 27, 2012

    We should only sell RBS or any shareholding in it until there has been full disclosure of the nature of its toxic assets – with quantification – and a full statement of the likely liabilities from past mis-selling.

    Unfortunately, the Prime Minister and the Chancellor appear not to share your enthusiasm for breaking up RBS, or Lloyds for that matter. It’s the same with housing. The planning regime is to be relaxed so that BIG builders can build BIG estates. Whatever happened to the model of adding extra houses to hamlets to turn them into villages in order to make them more economically viable?

    1. zorro
      March 27, 2012

      Maybe they don’t think that they can reduce net migration…?


  23. Mark
    March 27, 2012

    If you look at the detailed RBS accounts, you’ll find that really only Ulster Bank and the Non-core division have really written down their assets somewhere close to adequately. If you want to look at what the main UK retail bank might become, just scale up Ulster Bank. RBS has made headway with shedding lending to business and other banks, but it simply hasn’t begun to tackle its mortgage book. It will not be salable until it does so.

    Then again, there can be some nasty surprises. If you look at the 2010 accounts, you’d be under the impression that RBS had virtually eliminated exposure to Greece, yet when push came to shove for the recent Greek debt writeoff agreement, magically RBS seemed to have far more exposure than was in those accounts. I don’t think that is because they gambled recently on buying a bunch of Greek debt – perhaps the directors could tell us.

  24. MajorFrustration
    March 27, 2012

    I already sense that the pyblic is once more about to be shafted. Dont you just love our politicians

  25. Denis Cooper
    March 27, 2012

    I wondered what Osborne is expecting from National Savings, and googling I happened across an article from earlier this month:

    “Seventy years ago this month, Hove Council ran a National Savings Warship Week. The town was set a target of £425,000 and raised the amazing total of £521,000.”

    But that isn’t at all what Osborne wants now, according to Annex C in this recent document:

    “C.5 Gross inflows (including reinvestments and gross accrued interest) into NS&I’s products are projected to be around £14 billion in 2012 – 13. After allowing for expected maturities and withdrawals, NS&I is expected to make a zero net contribution to financing (within a range of -£2 billion to +£2 billion) in 2012-13.”

    In other words, Osborne is not intending to appeal to the ordinary people of this country to voluntarily help get their government out of its financial difficulties, in the way they were asked to help during the war; instead he prefers to tax them to pay interest on gilts sold to institutional bond investors, many of them foreign.

    So it wouldn’t come as a huge surprise if he did raise some money by flogging off a chunk of RBS shares to foreign investors at a knockdown price, so that they can take the future profits while the British people bear the losses.

    One alternative being to make use of National Savings to raise the money for him from the citizenry through the sale of tax-exempt Bail-out Bonds, which on maturity after five years would pay guaranteed interest plus a bonus related to the rise in the RBS share price during that period.

  26. Mike Stallard
    March 27, 2012

    I am just wondering if any hedge fund managers have, after an exchange of pleasantries, been invited to a candle lit dinner with Mr and Mrs Cameron in No 10 Downing Street which, because it is their home, is their business and don’t be nosy.

  27. David Langley
    March 27, 2012

    Yes and what about my £15k investment in shares, bailing out RBS is one thing, writing off my investment is another. Do I start getting my marching boots on for this one John? Selling off the good bits, what good bits? Trading back to profit is what we want, and full transparency on what is holding it back. No one mentions credit card debts but there must be huge write offs connected with them alone, and if we are still looking down the barrel of Mortgage debts why should the public get stuffed yet again until they are cleared. RBS is not for sale until it is back to health just like Britain. So yet again when are we going to ditch the EU project, use our Aid money to aid ourselves. How can writing off debt be squared with profligate public borrowing and spending, are we living in a mad house, does the government have any common sense. Perhaps its time for Cameron to invite the Ibn Saud family round for a donation, perhaps we could make him “Emperor of The British Empire” and have a joint Royal Family?

  28. uanime5
    March 27, 2012

    Given that North Rock was sold at a loss it wouldn’t surprise me if the same happened when selling RBS.

  29. Acorn
    March 27, 2012

    I ain’t arf glad I didn’t buy them RBS shares for 50p last year. Particularly as I had already paid for them via my taxes. I am trying to remember who was pushing those shares at the time!

  30. Matthew
    March 27, 2012

    Rescue and then sell at the bottom of the market, doesn’t make much sense to me.

    The RBS name I think is finished, tarnished, your suggestion of launching three or so banks, going to the market for capital is a very good idea.

    The lack of adequate bank lending must be dragging the economy back and I’m not talking of the pie in the sky young lad’s business plans where they expect bank lending to replace the need for equity.

    I recently saw a profitable company supplying to the pharmaceutical sector debtor days 45 – told by the bank that the overdraft was being withdrawn – they have to go invoice discounting, finance costs doubled.

    The government hasn’t cut enough, pushed the public sector for more efficiencies

    Hasn’t sorted out bank lending (What’s the Bank of England doing now differently to what they probably would do if Mr Brown was still PM?)

    Kept taxes too high

  31. zorro
    March 27, 2012

    Please be so kind as to inform the PM that there is an alternative to nocutspermanentQEism……He needs to look at the British recovery in the 1930s (please remember to tell him that this is before even when he thinks we were the junior partner in the US/UK relationship….)….

    Metroboom – aka ‘Listen with Nev’


    1. zorro
      March 27, 2012

      (Taken from above report)

      Five lessons can be drawn from the economic policies pursued first by Labour’s Philip Snowden and later by Neville Chamberlain:

      1) Spending cuts work. Tough spending cuts – including an immediate 10% cut in benefits and civil service salaries – quickly led to balanced budgets and maintained the confidence of citizens, businesses and international investors. Today’s cuts are much shallower in comparison.

      2) Austerity in the public finances must be matched by a cheap money policy to encourage the private sector to expand. While this was achieved in the 1930s, the appropriateness of today’s Quantitative Easing policy is far less certain.

      3) Confidence in the legal and political foundations of the financial system must be restored. The early 1930s saw a number of high profile trials of those who had misbehaved in the previous decade. Today, nothing similar has happened and public confidence in the banks remains low.

      4) Tax cuts work. From 1934 on, Neville Chamberlain’s tax cuts for families and the low paid gave a further boost to business confidence. The top rate of tax was only 37.5%. A similar approach is needed today.

      5) Press on with welfare reform. The National Government failed to do enough for the long-term unemployed and for those areas which had been hit particularly hard by the recession. Today’s Coalition must not make the same mistake.

      ….Time to get out the stiff shirt and necktie John….


      1. uanime5
        March 28, 2012

        1) Expect to lose votes for all who lose their benefits. Also expect strikes from those whose salaries are cut and protests from those whose benefits are cut.

        2) The danger of this is that it could create a bubble which will cause a recession when it bursts. The usefulness of this is also questionable when most large companies have millions in cash reserves. Perhaps it should only apply to smaller companies.

        3) This would restore confidence. Sadly all Governments pander to the City so don’t expect them to be punished for their misbehaviour.

        4) The Lib Dems are trying to implement this by raising personal allowances so that minimum wage works will not longer pay income tax.

        5) Welfare reform cannot end long-term unemployed. If there are not enough jobs available then there will be unemployment. To reduce long-term unemployment the Government either has to create jobs or offer retraining that is valued by the private sector so the unemployed can work in another industry.

  32. Credible
    March 27, 2012


    ‘Incisive and topical commentary on today’s issues’
    You’ve recently written about RBS, economic plans, taxation, public spending, Sunday shopping!! – but not a thing about access to government by big donors.
    What are your views on that?

  33. Dave666
    March 27, 2012

    Oh dear John have you just noticed the world beating UK Management usually bugs out when actual management is required.

  34. Cal
    March 27, 2012

    Spot on – but the collusion between big government and big business is one of the problems as highlighted here:( reference talks about RBS individuals but does not tackle the general issue-ed)

  35. Christian Wright
    March 28, 2012

    The whole nutty idea of the early sell-off probably came up during a private dinner with Dave and Samantha. The potential rewards to the eventual purchasers are well worth the 250,000 the dinner cost the guest who proffered the notion. Your bank, your money, their gain.

    Plutocracy at work.

    More Chablis, Prime Minister?

    1. Denis Cooper
      March 28, 2012

      It was being mooted as long ago as July 2009:

      Then the idea was for UKFI to sell:

      “exchangeable bonds, which would be sold at a small premium to the state’s entry price and pay a minimal interest rate for a fixed term, likely to be three years. The buyer would then take ownership of the shares if they have risen above the initial sale price, pocketing a profit.”

      Hence my suggestion that if there was potentially a profit to be pocketed then it should not all be handed to institutional investors, but at least some of it should be made available to the wider population through National Savings.

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