Save RBS from Corbynism
NOW that we are all obsessed with Brexit, we are in danger of forgetting we are still paying for the last crisis.
In the report from the Office for Budget Responsibility (OBR), there was a sobering chapter setting out the huge costs of propping up the banks.
A total of £136.6bn was paid out by the Treasury following the financial meltdown. Large sums have been repaid, but there is still a shortfall of more than £19bn.
These are staggering sums. It would have been worse, of course, had the Government not intervened: that would have resulted in Armageddon.
Now ministers need to tie up the last bit of unfinished business and return RBS wholly to private ownership – and they need to act fast, rather than run the risk of the bank falling into the tender mercies of shadow chancellor John McDonnell if Labour win an election.
Even the latest figures in the OBR analysis do not encompass the full costs to shareholders and society. Take Barclays. It did not avail itself a bailout from the UK government, having controversially secured capital from the Middle East in a deal which is now the subject of a court case brought by the Serious Fraud Office.
The costs of the crisis for its investors added up to nearly £37bn over the past seven years, a colossal amount of money. The tab included £15bn for misconduct and law suits, £2.4bn in bank levies, £7.1bn in taxes, £10.1bn losses from poorly performing fringe businesses and £1bn for ring-fencing. Once tax bills were added in, that virtually obliterated the entire operating profit for the period.
At RBS, of course, it was worse. The new OBR figures show that having put in £45.8bn, the taxpayer is still £31bn down.
EVEN at a loss, the sooner that the bank can extricate itself from government – it still has a stake of around 62pc – the better. Especially now that McDonnell is prowling bank boardrooms on his ‘cup of tea offensive’.
RBS is back in profit and has £4-5bn surplus capital. By far the best use for it would be to buy back government shares, which it has authority to do up to a 5pc ceiling.
One sign it is returning to normality is the shareholder register. The bank has previously been the preserve of small investors and US hedge funds taking a punt, but it has begun to attract backing from some serious investors.
Its biggest private shareholder is Norges, the Norwegian sovereign wealth fund, which holds around 6pc of the free float and is an ultra long-term investor. Until recently, pension funds and income funds have not invested because it did not pay a dividend. Now that payouts have resumed, more mainstream investors may come back.
The bank has behaved disgustingly in the past. It still has issues to sort out with small firms who were maltreated and a report from the regulators is due shortly. But the last of the big conduct fines in the US has been resolved and the majority of the PPI mis-selling costs have been covered.
Some people will always hate RBS because of their own personal experiences but it has been chastened and, as the biggest lender to small firms, it could play a positive role in the economy. If it is ever to atone for the sins of the past then it needs to come out of state control.
If McDonnell comes to power, that process of returning to normality could come to a shuddering halt. They have talked about using RBS as the basis of a National Investment Bank, a new publicly owned institution to underpin their industrial policy.
What a tragic irony it would be for shareholders if RBS was plunged back into state hands at this juncture and forced to become the tool of a misguided socialist cabal.