RBS loses £5bn

The taxpayers’ bank is still struggling to make money. We are told that if you regard the losses as special items relating to the past the underlying bank is now profitable. The problem is we the taxpayers have to pay for the total losses. More radical approaches to the structure and sale of this banking group are needed.

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63 Comments

  1. Gary
    Posted February 28, 2013 at 9:43 am | Permalink

    And this goes on year after year. The clueless and corrupt are running the asylum and we stand there like sheep, dribbling from out of the side of our mouths , bemused.

    Animal farm was a picnic.

  2. lifelogic
    Posted February 28, 2013 at 9:56 am | Permalink

    The real cost to the country and to tax revenue, as a result of the many loans and the restricted lending policy they have, is hugely more than the actually losses the bank is making.

    The government in leaving this bank in the position it is have shot itself in both feet and shot growth through the head.

    On might have thought that as the government own it they could have at least stopped it pulling good sound loans from good sound UK companies but no. The would rather have the money back, the workers laid off, kill growth and have the tax revenues down.

    Well done RBS/Natwest/Coutts. A bank that cannot make money in the current conditions is incompetent.

    • lifelogic
      Posted February 28, 2013 at 5:03 pm | Permalink

      I see Dame Helen Ghosh recently appointed as £160,000 a year director-general of the National Trust celebrated by giving an interview in which she declared that “a wind turbine in the right place is a rather beautiful thing” and “The National Trust, as an organisation, takes the view that in the right place – and because of the importance of renewable energy – we don’t object to them.”

      I trust all sensible people will resign. Anyway they do not even work in economic or environmental terms – if they did it might be worth putting up with them as “things of beauty” giant noisy bat and bird killing machines – but they simply do not.

      • Graham Swift
        Posted March 1, 2013 at 12:36 pm | Permalink

        I wonder how much money is given by the EUSSR to the National Trust ?
        The NT is , of course , yet another bloody quango. I seem to recollect that Bullingdon Boy was going to get rid of quangos . There are actually more of them after almost 3 years of this failed coalition government.

      • Edward2
        Posted March 2, 2013 at 12:03 pm | Permalink

        Lifelogic,
        I resigned some years ago, shortly after Simon Jenkins became involved in the NT and the charity increasingly campaigned on issues which in my opinion were outside the core reasons for its existance.
        This latest appointment is another step down that road.
        Ditto RSPCA

  3. Edward2
    Posted February 28, 2013 at 10:04 am | Permalink

    “Save the world” Gordon Browns complete folly of nationalising these banks can be seen now as an expensive failure, which will continue to be a drain on our taxes for years to come.
    He was strongly politically inclined towards nationalisation as a solution, as well as having a strong desire to save the Royal Bank of Scotland just because it was Scottish.

    If he had only just quickly increased the amount of protection available for deposit holders and arranged for the other strong banks to take them over, billions would have been saved.

  4. Julie Innis
    Posted February 28, 2013 at 10:09 am | Permalink

    Why are RBS still allowed to pay out bonuses when the taxpayer is owed so much? My brother- in- law retired from RBS at the age of 50 on a pension many of us can only dream about and looks forward to a healthy increase every year paid for by taypayers and pensioners on fixed incomes.

    When are the Government going to put a freeze on all bonuses and pay & pension rises until the taxpayer is paid back in full with interest?

  5. Brian Tomkinson
    Posted February 28, 2013 at 10:09 am | Permalink

    I wonder what other ‘special items relating to the past’ will be revealed this year leading to more losses? Incidentally, the Telegraph reports the loss as £5.2 billion but what’s another £200,000,000 between friends?!

  6. Richard1
    Posted February 28, 2013 at 10:32 am | Permalink

    I do not think the Govt’s plans for RBS sound sensible. Mr Osborne has effectively taken over the strategic direction of the company, making a nonsense of the role of the board. A reminder again what bad news it is to have governments as shareholders in businesses, even when supposedly free market politicians are in office. Can it really be possible to sell down the govt’s stake? what would the value of the shares be in a true free market where the govt was not backstopping RBS & all losses had to be recognised? A better policy would be full recognition of losses, break-up of the business and privatisation of the component parts after that. It could well be there is no equity value. (Mentally add £70bn to the cost of Gordon Brown’s period in office).

  7. stred
    Posted February 28, 2013 at 10:37 am | Permalink

    Why do people like bankers need ‘skin in the game’? This euphemism sounds very similar to ‘fingers in the till’ updated. Why, in the UK, are some professions, such as engineers and architects, artists, academic researchers, lecturers, nurses and more paid less than in other countries, but some such as lawyers, chartered acountants, and GPs paid more than other countries. And in the first two cases they are also employed in much greater numbers.

    The answer is to do with monopoly rights to do the work gained by their professional intitutes or, especially in the case of bankers, because other peoples money passes through their hands. Is it any wonder that they invent ways to shovel the money into their pockets and are then caught out when it goes wrong and use other peoples money for compensation.

  8. Horatio McSherry
    Posted February 28, 2013 at 10:44 am | Permalink

    This idea is beyond ridiculous; but lets go with it. We can pretend they’re making a profit, they can pretend we’re giving them money, and everything’s all sorted. It’s like the old Bill Hicks joke:

    “Hicks, how come you’re not working?”
    “There’s nothing to do.”
    “Well, pretend like you’re working.”
    “Why don’t you pretend I’m working? You get paid more than me, you fantasise. Pretend I’m mopping up, knock yourself out. I’ll pretend they’re buying stuff; we can close up. I’m the boss now, you’re fired. How’s that?”

  9. Iain Gill
    Posted February 28, 2013 at 10:51 am | Permalink

    at least its not the NHS eh, wasting our billions and killing us by the thousand

    or the state schools costing us a fortune but running the worst schools in europe

    and at least the customers can leave RBS and impose some modest market pressure on them and they are not forced into taking the provider imposed a la NHS and school system

  10. Peter Davies
    Posted February 28, 2013 at 11:19 am | Permalink

    Is that it now? No more losses?

  11. behindthefrogs
    Posted February 28, 2013 at 11:28 am | Permalink

    “The problem is we the taxpayers have to pay for the total losses”

    A fairly doubtful statement. Surely no more so than any other company making a loss. I would agree that while the bank is making losses the government can’t sell the shares that it holds or take a dividend but that is hardly paying for the losses.

    Much more worrying and on a larger scale is the huge amount of money invested in redundant military equipment. Most of this will have to be written off, while there is a chance of eventually recovering a lot of the money invested in RBS.

    Reply We are the owners, so the losses are paid out of what we own. We are literally paying for the losses.

    • A different Simon
      Posted March 1, 2013 at 12:11 pm | Permalink

      John , Behindthefrogs ,

      What are the limits of liability for UK Banks from the perspective of shareholders ?

      Is the taxpayer obliged to honour losses on derivatives which exceed the aggregate value of deposits covered by the deposit guarantee scheme ?

      What is to stop something similar happening as happened in the US whereby a major insurance company which sold synthetic CDS retrospectively changed it’s status to “bank” in order to make it eligible for tarp money to recapitalise a counter party which is a proprietary trading house with an investment bank bolted on ?

  12. JimF
    Posted February 28, 2013 at 11:40 am | Permalink

    So let’s get this right. If as an SME I owe money to RBS due to past losses, I can write to them and say that these losses are a “special case” and my underlying business is sound, so they should carry on ploughing loans into my business? They would think I was trying on some kind of joke, I think. Yet RBS, in saying this, are effectively “spinning in denial” by trying to avoid/misstate their underlying financial position. This is coming extremely close to fraudulent activity in itself. It is easy to counter their argument by saying that if they weren’t being helped out by a special case (ZIRP), even their current position would be calamitous.

  13. Neil
    Posted February 28, 2013 at 11:51 am | Permalink

    £4.6Bn of the £5.2Bn loss is a non cash balance sheet adjustment. How then is the taxpayer having to pay for “the total losses”?

    • Mark
      Posted March 1, 2013 at 11:37 am | Permalink

      The “own account debt” provision is the result of modern bizarre accounting rules. What it hides is that previously profits were artificially boosted under the rules (well, actually reported losses were reduced) because the market value of bonds issued by RBS had fallen substantially. This year, a combination of zero interest policy and some improvement in the credit rating of RBS has seen those bonds trade at higher prices, which now has to be recorded as a loss under the rules.

      The idea that the bank will simply honour its obligations to repay the bonds when they fall due, and to pay coupon interest in the meantime seems to be anathema to accountants.

  14. A.Sedgwick
    Posted February 28, 2013 at 12:34 pm | Permalink

    This is one of numerous blindingly obvious national situations that only needs common sense to resolve not high economics. RBS should never have been allowed to buy up Natwest and ABN Amro in the first instance, it was always high risk and anti-competitive. By now RBS should have been returned to being just a Scottish National Bank, based in Edinburgh and the rest unbundled. September 15th 2008 is the date Lehmanns was allowed to go under and basically start the banking crisis. It is difficult to understand why RBS still remains recognisable as a trading entity nearly five years later.

  15. roger
    Posted February 28, 2013 at 12:52 pm | Permalink

    John. Aplogies for going off topic. Your excellent contribution to the debate on social housing yesterday suggested that the policy would not save money. Whilst appreciating that the bill would be welcome in many respects, is this not another example (eg. gay marriage) where we are likely to get a lot of grief and lose votes for no actual financial gain to the economy.

  16. StephenS
    Posted February 28, 2013 at 12:54 pm | Permalink

    If we were in charge of our own destiny rather than requiring permission from and or/taking our orders from the EU (which now seeminglly has teh power to intervene in setting private sector pay rates, thus undermining capitalism and further entrenching institutional socialism in Europe), the simple answer would be to split the bank, and treat each as a newly emerged bank, with lower capital reqruiements.

    • uanime5
      Posted March 1, 2013 at 4:50 pm | Permalink

      If capitalism requires that bankers be paid more than their salary as a bonus then capitalism is something this country needs less of.

      • Edward2
        Posted March 2, 2013 at 5:25 pm | Permalink

        Uni,
        Its nothing to do with capitalism nor free markets.
        Bankers are paid what somebody thinks they are worth.
        If they are paid more than they are worth then the business will eventually go bust or someone else will enter the market to take advantage of excess profits available.
        Entry into the market is difficult and the State got in the way and bailed out the failed banks and now there is a feeling that they are too big to fail and if they do fail the State will bail them out again.
        This is not how capitalism works

  17. Roy Grainger
    Posted February 28, 2013 at 1:35 pm | Permalink

    What I don’t understand at all is why an organisation making such a huge loss is paying any staff bonuses at all. The banking sector is unique in doing this in my extensive experience of large private sector companies.

  18. Denis Cooper
    Posted February 28, 2013 at 1:58 pm | Permalink

    Off-topic.

    On February 6th the Tory MP John Baron introduced a Private Members’ Bill which would put legislation in place for an “in-out” EU referendum in the next Parliament:

    http://services.parliament.uk/bills/2012-13/unitedkingdommembershipoftheeuropeanunionreferendum.html

    Until now it’s been down for its Second Reading on the date Mr Baron stated at the time of the First Reading, tomorrow, March 1st, and that was still the case last night.

    Now it’s been moved to April 26th.

    Make of that what you will.

  19. Bob
    Posted February 28, 2013 at 2:02 pm | Permalink

    When the bank was making mega profits from their mis-selling and libor rigging, Gordon Brown was only too happy to take a 30% cut of profits. He never bothered to enquire how a bunch of desk jockeys could generate such a huge amount of money by shuffling a few bits of paper around and taking a long expenses account lunches.

    It suited the government of the day to turn a blind eye to the source of the cash, just like it suited the Lib Dems to do the same with the £2.4 million they received from Michael Brown.

    Meanwhile, genuine productive businesses trying to add value and compete on the world markets were squeezed by both Brown and the banks until the pips squeaked!

    Now Brown and Goodwin are nowhere to be seen, and the rest of us are left to pick up the pieces. (words left out-ed)

    • APL
      Posted March 1, 2013 at 11:36 am | Permalink

      JR: “words left out”

      Do you get the impression yet, we are not happy puppies?

      I suppose it could be worse the Spanish bank Bankia just announced a loss of £19bn on the domestic Spanish real estate market.

      The root cause of all this, real estate bubbles inflated with the collusion of the politico-banking cartel.

    • A different Simon
      Posted March 1, 2013 at 12:36 pm | Permalink

      Bob ,

      The branch personnel in banks which had the expertise to lend to SME’s were in their 40’s , 50’s and early 60’s back in 1990 and were sidelined by 2000 and have since left the workforce .

      The culture which created them was destroyed at the same time and had taken many decades to establish .

      I just don’t think the banks have the expertise to lend to particularly small businesses any more . Sure they can see what security the customer can offer but that doesn’t make them bank managers .

      We’ve got a problem and it isn’t going to be fixable overnight and the Govt forcing the banks to lend to small businesses isn’t going to help because they no longer know how .

  20. David Langley
    Posted February 28, 2013 at 2:08 pm | Permalink

    Without the fiddling and the abysmal risk taking this bank would have been ok. It makes profits and has satisfied the penalties for its past misdeeds. I am not aware of anyone going to jail for the misdeeds however. It is a certain bet that if I lied and fiddled in my past employments I would have been sacked and summoned to court. It appears that banks executives allowed knowingly their employees to act criminally and achieve vast profits like all the others in the sector, no one had the guts to blow the whistle to the press or regulators. I know of one risk manager who appealed to his bank director that the situation was beyond parody and he was told to shut up and get on with it.

  21. Jerry
    Posted February 28, 2013 at 2:18 pm | Permalink

    So what is the government -as majority shareholders on behalf of the tax payer-doing to stop RBS (and any other bailed out bank) from paying directors and other staff bonuses and above average salaries. Perhaps the solution if to simply wind down they failed banks, or perhaps make the co-operative/mutual style banks and building societies (once again, in some cases…)?

    • Jerry
      Posted February 28, 2013 at 2:29 pm | Permalink

      Oh and John please can you tell us if you have (effectively) closed your older blogs to new comment/reply, there are some comments now 48hrs in moderation yet you have fond time to not only to post new blogs but moderate comments to them – are we thus just wasting our time on any blog older than 24hrs?

    • Jerry
      Posted March 1, 2013 at 11:20 am | Permalink

      Thank you.

  22. Mark
    Posted February 28, 2013 at 3:01 pm | Permalink

    I looked through the results presentation. From what I can see, provisions so far are only around half the assets at risk (REIL in jargon), and there is a further £20bn of writedown to be expected. That’s before we consider what happens if there are further problems with the EU (although I think RBS have finally managed to limit exposures somewhat), or with residential real estate in GB. At least a large chunk of correction in commercial real estate prices has already occurred, and this was a major exposure for RBS.

    I think we can expect several more years of large writedowns.

    Perhaps we need a strategy for diffusing the GB property bubble. At least in January, there was a modest net repayment of mortgages. Attempts to pump up house prices crowd out funding for the real economy.

  23. Terry
    Posted February 28, 2013 at 4:03 pm | Permalink

    Black is white, again.

    Shuffling the figures is not going to convince me that RBS is a viable concern. It is time we rose up and kicked this sort of shenanigans into touch, along with the instigators and those that perpetuate this farce. RBS owes us, the tax payers around £50 Billions and we are never going to get that back thanks to dim-witted Labour and nearly as dim-witted persons in Downing Street.

    • Mike Stallard
      Posted March 1, 2013 at 7:24 am | Permalink

      What a good comment: I agree.

  24. lifelogic
    Posted February 28, 2013 at 4:58 pm | Permalink

    RBS/Natwest/Coutts and the failure of this government to sort them and get them lending is one of the (many) huge missed opportunities this government has thrown away. I hope they come third or worse in this bye-election. UKIP is the only party saying anything sensible currently. Cameron/Osborne could not be trusted -even if he did ever say anything sensible anyway.

  25. Jon
    Posted February 28, 2013 at 7:00 pm | Permalink

    It looks as if it is being kept as a vote sweetener and would be sold as a large whole group. There is a huge issu with competition in the banking sector and the FSA wanting to keep it that way. RBS could have been an opportunity to create a number of smaller banks eager to compete with the different owners.

  26. Bazman
    Posted February 28, 2013 at 7:14 pm | Permalink

    The latest scam is negative interest on your savings. As in you pay them to look after your money. I should not think I will be paying anything as I will go to the most ludicrous lengths to avoid paying the banks any money even if it costs me more money.

    • alan jutson
      Posted March 1, 2013 at 7:49 am | Permalink

      Bazman

      I am with you.

      But as I have said many times, most Mps do not understand Human nature.

      The joke is they think the Banks will lend more money to businesses if they pull off this scam.
      Dream on.

      • A different Simon
        Posted March 1, 2013 at 1:01 pm | Permalink

        I agree that it is a bad idea for banks to charge purely for looking after money .

        I don’t like the way the Govt charges people for their money through inflation which is a tax .

        On the other hand , processing cheques and other financial transactions is a service and costs money to administrate . Even a dormant account cost a small amount of money to administrate .

        If the banks do not charge nominal amounts for day to day banking services then they have to use the deposits to generate the money to do so which will involve an element of risk .

        Should banks be charging a nominal amount for banking services on deposit accounts and thus end so called “free banking” ?

        Should interest on interest bearing accounts derive from profitable lending ?

        Even if banks had the will to lend , do they still have the people to do it successfully ?

        • Bazman
          Posted March 2, 2013 at 6:53 pm | Permalink

          Bank charges? Now you really are having a laugh.

    • uanime5
      Posted March 1, 2013 at 4:55 pm | Permalink

      Well given that interest rates are below inflation in real terms you’re already being charged to put money in a bank. Negative interest rates just make it more obvious.

  27. matthu
    Posted February 28, 2013 at 7:35 pm | Permalink

    Is the Conservative Party in Eastleigh guilty of passing off? They have just started issuing CP electoral advertising in UKIP colours (see Guido).

    They must be getting pretty desperate!

    Of course, our host would not want to associate himself with such low life electioneering and will surely want to denounce it in the strongest terms.

    • Bob
      Posted March 1, 2013 at 2:16 pm | Permalink

      @matthu
      “our host would not want to associate himself with such low life electioneering and will surely want to denounce it…”

      Come on Mr R, the count is finished now, so nothing to lose by denouncing the dirty tactics of nailing ukips colours to the your mast.

  28. bigneil
    Posted February 28, 2013 at 7:53 pm | Permalink

    what about the government rushing round and giving them a few billion pounds of taxpayers money – – -or has that been tried before??? – -they might stick it in their pockets as bonuses if they thought they might get away with it – -THE SECOND TIME – which probably means that will be exactly what they will do – -and the taxpayer coughs up again – –

  29. StevenL
    Posted February 28, 2013 at 8:40 pm | Permalink

    The problem is we the taxpayers have to pay for the total losses

    At least we’re building up some deferred tax assets to flog on!

  30. Matthew
    Posted February 28, 2013 at 11:48 pm | Permalink

    Your idea, to divide the bank up into its original constituent parts, where they go to the market to raise capital, seems to be the best option.
    There would be some high street competition and the new banks would be there to lend to SME’s.
    The big banks are averse to lending to small companies, too risky, too expensive to monitor.
    We need to take a lead from the US where they have a lot of smaller state banks, farmer’s banks that specialise in small company loans.

  31. Mark
    Posted March 1, 2013 at 1:43 am | Permalink

    Missing post here too.

  32. Monty
    Posted March 1, 2013 at 2:22 am | Permalink

    Well it just happened. UKIP beat your party into 3rd place. But you knew that was coming.

  33. David Price
    Posted March 1, 2013 at 7:27 am | Permalink

    With such a big loss why the bonuses at all?

    I can understand that some parts of the bank might be making large profits while others making losses so some deserve performance related bonus. However, a large non-financial multi-national I worked in set bonuses according to a combination of personal, team and company peformance where the key factor was that the company had to make a profit in the first place. No company profit for the owners meant no bonus for anyone.

    There are striking parallels in the reward-for-failure mentality in RBS and the public sector.

    • Neil
      Posted March 1, 2013 at 1:36 pm | Permalink

      So how would you incentivise the thousands of competent front line / high street employees (bearing in mind the massive losses are almost entirely due to decisions made by a handful of executives who are long gone)?

      Remember most bank employees earn less than the national average wage and “massive bonuses for bankers” is always shorthand for “massive bonuses for City investment bankers”.

    • Bob
      Posted March 1, 2013 at 2:25 pm | Permalink

      It what happens when organisations get too big – like the NHS, BBC, EU.

  34. cricket john
    Posted March 1, 2013 at 11:26 am | Permalink

    How depressing £5.2 billion loss, but look on the bright side only £650 million to be paid in bonuses. Comment from goverment spokesman well done for holding down the level of bonuses

    What sort of drugs are these people on. !!!!!

  35. Mark
    Posted March 1, 2013 at 5:52 pm | Permalink

    Missing answer to Neil.

  36. A different Simon
    Posted March 1, 2013 at 6:21 pm | Permalink

    This crock will never be able to make a profit without taxpayer handouts . Imagine if they had to pay the market rate for all this underwriting the taxpayer is provided and ZIRP .

    Even Gareth couldn’t Bale this lot out .

  37. Bazman
    Posted March 1, 2013 at 6:32 pm | Permalink

    What would you all have to say if the RBS boss was a union boss trying to keep wages and jobs for the employees of a nationalised industry. Not giving millions to a few who crashed the bank. Have think and then have a think how right wing and stupid your views are leading to a blind belief in capitalism not unlike the communist era.

    • Edward2
      Posted March 2, 2013 at 12:21 am | Permalink

      But Baz, you completely miss the point, RBS is a nationalised industry.

      • Bazman
        Posted March 2, 2013 at 6:57 pm | Permalink

        That was my point Edward and Edward… Dumb and Dumber more like.

        • Edward2
          Posted March 3, 2013 at 6:42 pm | Permalink

          Baz
          As usual you descend to abuse when you are unable to answer with a suitable argument or explanation.
          If RBS wasn’t a nationalised company supported by the taxpayer and had to operate in a proper competitive market the excesses you complain about would not be able to happen.

  38. Mark
    Posted March 2, 2013 at 3:40 pm | Permalink

    Still missing…

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    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

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