RBS
Debate between Lord Ashton of Hyde and Lord Hollick
Lord Ashton of Hyde
Of course, the banking regime has been tightened, as we all know. I mentioned a few minutes ago criminal penalties for rogue traders and also the officers of banks. It is true that when we look at the previous regime, there is no doubt that we are making progress in that respect. As I said before, it is important that the culture is there in the banks. I believe that that is better than it was.
Lord Hollick (Lab)
My Lords, perhaps the Minister can tell the House why it is considered that now is the right time to make this sale. Incurring a £15 billion loss for the taxpayer is clearly a rather painful experience. The reasons for selling shares in those circumstances are usually either that you have run out of money, which is palpably not the case here, or you fear that the shares will trade lower. The reasons given by the Bank of England are interesting but, in investment terms, not convincing. Could the Minister explain why it is necessary to do this now?
Lord Ashton of Hyde
First, if the Government thought that the price was to reduce in future, they would sell the whole lot now—and they are not. As the noble Lord mentioned, the Governor of the Bank of England said that the return would promote financial stability and a more competitive banking sector. He also said—this has not been mentioned—that avoiding the sale would have the potential to incur considerable net costs to the taxpayer, further delaying the start of a sale.
Rothschild’s advice also said that by starting the sale now,
“the government will increase the free float which should in turn improve the marketability of the remainder of its shareholding”.
It will also send,
“a strong signal that RBS is on the road to recovery and that its reprivatisation has begun may also bring further benefits to the bank and therefore to the taxpayer as a shareholder”.
Currently, the:
“Market conditions for financial assets and bank shares are … good”.
The overall accumulation of that advice is that, in the absence of unforeseen circumstances, taxpayers can comfortably expect to secure proceeds from their interventions in the banks that exceed the money they put in.