Bloomberg News

Osborne Sees ‘Practical Obstacles’ to Nationalizing RBS

February 25, 2013

U.K. Chancellor of the Exchequer George Osborne said any nationalization of Royal Bank of Scotland Group Plc (RBS) would face “serious, practical obstacles.”

Taking full ownership of the Edinburgh-based lender, 81 percent owned by the British taxpayer, would require as much as 10 billion pounds ($15 billion) of public money, Osborne told a parliamentary committee investigating standards in banking today.

“I’d have to go to the House of Commons and justify spending up to 8, 9, 10 billion pounds on nationalizing the Royal Bank of Scotland,” Osborne said. Splitting the bank would then be a complex process, deciding upon which assets would be kept in the bank to be privatized and which should be kept by the government to maturity, he said.

The current plan to reduce RBS’s assets and have it focus on U.K. clients is the one he “expects it pursue,” he said.

Nigel Lawson, a former U.K. finance minister who sits in the upper chamber of Parliament, suggested Osborne split the bank into a “good bank and bad bank” to cleanse its balance sheet and make it less reluctant to lend.

“It follows logically that if you have a major bank that does not have all these impaired debts on its balance sheet then it might be readier to lend to” small businesses, “which would be good news to the economy on the whole,” Lawson said.

Giveaway Proposal

RBS Chief Executive Stephen Hester has cut assets by more than 800 billion pounds, eliminated 36,000 jobs and scaled back RBS’s securities and Irish units since he took over from Fred Goodwin in 2008.

Prime Minister David Cameron last week kept open the possibility of giving away shares in RBS to the general public. He described the idea, first proposed by his Liberal Democrat coalition partners, as “interesting.”

The government injected 45.5 billion pounds ($70 billion) into RBS five years ago in the costliest bank bailout in the world. It still faces a 13 billion-pound paper loss on its investment and Osborne has signaled he wants to recover the price paid for the shares before returning the bank to private hands.

To contact the reporter on this story: Howard Mustoe in London at hmustoe@bloomberg.net.

To contact the editor responsible for this story: Edward Evans at eevans3@bloomberg.net


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