Osborne to decide on RBS bad bank in next couple of weeks
U.K. REGULATORS ARE considering the option of breaking up Royal Bank of Scotland, which received the biggest bailout of any bank in the world during the financial crisis, and spinning its toxic assets off into a "bad bank," said U.K. Chancellor of the Exchequer George Osborne in London Tuesday.
BLOOMBERG FILE PHOTO/MATTHEW LLOYD
By Svenja O’Donnell, Thomas Penny and Kitty Donaldson Bloomberg News
LONDON - U.K. Chancellor of the Exchequer George Osborne said he expects to decide whether Royal Bank of Scotland Group Plc should be broken up and its toxic assets spun off into a “bad bank” in the “next couple of weeks.”
RBS is “the next big decision in my in-tray,” Osborne said at a Reuters event in London Tuesday. “A lot of people out there said we should look at the case for a bad bank. It’s clear to me that we do need to address some of the problems at RBS.”
Osborne was speaking shortly after one of his deputies, Treasury minister Sajid Javid, said at the Bloomberg Dealmakers Summit in London that the government has yet to decide on the timing and format of the sale of the remaining stakes in another state-controlled lender, Lloyds Banking Group Plc.
RBS, which received the biggest bailout of any bank in the world during the financial crisis, is still too weighted with poor assets to be sold, Osborne has previously said. The U.K. made a profit of about 60 million pounds ($97 million) on the first sale last month of its shares in Lloyds, which the government took on as part of its 20 billion-pound bailout of Britain’s biggest mortgage lender in 2008.
In an interview with the Daily Telegraph newspaper published Oct. 19, Osborne had said a decision on breaking up Edinburgh-based RBS would be made by mid-November.
“We want to look at the bad bank idea, work both with RBS and other interested parties and look at this very carefully,” Javid, who is financial secretary to the Treasury, said in an interview with Bloomberg Television’s Mark Barton. “We will decide very shortly which way we want to go and we will announce that in due course.”
Javid declined to comment on which of three reported options for a bad bank he preferred: one run by an independent team within the company, one backed by the central bank and one as a separate taxpayer-supported unit.
Javid described last month’s sale of 4.28 billion Lloyds shares for 3.2 billion pounds as “successful by all accounts.”
“We will have a second round,” he said. “We haven’t made a decision when and we haven’t decided what format it’s going to take, but you can be sure that our long-term aim is to make sure the state has no interest in any bank.”
Osborne dismissed criticism that another privatization this month, the initial public offering of Royal Mail Plc, had been underpriced. Shares in the postal company, which were sold at 330 pence after being oversubscribed by institutional and individual investors, ended last week at 502.5p.
“If you want to have a retail offer you have to offer a discount,” the chancellor said. “It’s been a great success.”
RBS rose 0.9 percent to 356.1p at 1 p.m. in London. Lloyds was up 0.2 percent at 77.1p, while Royal Mail fell 2.5 percent to 485.75p.