Bloomberg News

Cable Says RBS Sell-Off ‘Now Looks a Distant Dream’

February 06, 2013

U.K. Business Secretary Vince Cable said that privatizing Royal Bank of Scotland Group Plc “now looks a distant dream” and again urged that the stock be given away to taxpayers.

Cable made the point as he attacked banks for still failing to lend enough money to small and medium-sized businesses and urged them to publish lending data broken down by local area. He has also written to the Bank of England asking it to look at why its Funding for Lending program is better at getting money to mortgage borrowers than companies.

On RBS, which the previous Labour government paid 45.5 billion pounds ($71 billion) to rescue in 2008, Cable said the coalition administration of which he’s a part has inherited “responsibility without control.” The government paid the equivalent of 502 pence a share for about 81 percent of the lender, meaning taxpayers are sitting on a paper loss of 14.5 billion pounds. The shares were 0.6 percent higher at 339.60 pounds as of 10:45 p.m. in London today.

“The early hope of reprivatization, however, now looks a distant dream, unless at an unacceptable loss,” Cable said in a speech at Bloomberg’s European headquarters in London. “Recapitalization may be the best solution, but it is currently impractical; full nationalization would cost the taxpayer billions.”

Instead, Cable repeated an idea first floated in 2011 by the leader of his Liberal Democrat party, Deputy Prime Minister Nick Clegg, of giving RBS stock away to registered voters.

‘Eventual Recovery’

Under this plan, Cable said, the public “can benefit from the upside of eventual recovery in share prices, while professional managers run the bank with a long-term mandate which includes a commitment to assist national recovery through expanded small and medium-sized enterprise lending.”

In an interview with Francine Lacqua and Guy Johnson on Bloomberg Television, the business secretary conceded that his Conservative Party coalition partners were not “enthusiastic” about the idea. “We think widely, and don’t close off options,” he told reporters earlier.

With the U.K. economy having barely grown since the coalition took office in May 2010, the government is putting increasing emphasis on the difficulty small companies face in borrowing money. In September, Cable said previous efforts had failed, and he announced the setting-up of a Business Bank to provide long-term finance. Prime Minister David Cameron called 38 large companies in the following month to ask them to look at ways to help firms in their supply chains get finance.

RBS is set to pay 400 million to 500 million pounds in fines for manipulating interest rates, the second-largest penalty imposed in a global regulatory probe, two people with knowledge of the matter said. The announcement may come as soon as today.

To contact the reporter on this story: Robert Hutton in London at rhutton1@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net


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