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When will the taxpayer get their money back?

I’m regularly asked the question as to when the government will get rid of their stake in Lloyds and RBS, return them to the private sector, give a profit to the taxpayer and butt out of banking.

I always give the same answer: “when the government needs votes”.

The reason for this is the government will need votes to get back into office in 2014 or thereabouts, and what better way to do that than to raise their hands and say: “Behold! We giveth the banks that Labour broke back into the hands of Enterprise. And Behold! We also maketh much wonga in doing this deed!”

When the government bailed out RBS and took over 84% of the bank, they paid 49.9 pence per share. For Lloyds, the taxpayer owns 41% of the bank at an average of 63.2 pence per share.

At today’s share prices of 41.8 for RBS (it did skate over 50 pence per share earlier this year) and 67.5 for Lloyds, the government could effectively be making several billions in profit at some point in the near future.

This will be great news for the government and the taxpayer, and the banks keep telling the government this news, pleading that they divest their ownership as soon as possible.

This is the theme that occurred again today as bank chiefs appear before the Treasury Select Committee – the Chair of which, Andrew Tyrie, will be speaking at our special end of year dinner at the Financial Services Club next week.

They want the government to butt out, sell their stock and take their profit.

Of course they do, as this will mean they are no longer under the influence of the UK Financial Investments (UKFI) Ltd, who has the bank’s boards by the short and curlews. In particular, Stephen Hester at the behest of the Chancellor and other Treasury officials is regularly hauled over the coals for due diligence in lending practices, fees, charges and other matters that, by rights, should be under the banks control.

It’s not.

It’s under the governments.

And whatever UKFI says about being independent and neutral, they do explicitly say: “ UKFI is a Companies Act Company (Company no: 6720891), with HM Treasury as its sole shareholder. The company’s activities are governed by its Board, which is accountable to the Chancellor of the Exchequer and – through the Chancellor – to Parliament.”

Between the Treasury Select Committee, UKFI, the Banking Commission, the Bank of England, the FSA, the media and the stakeholders, I actually feel quite sorry for these bank leaders.

Sacrificing bonuses and continually being raked over the coals, it cannot be a great life.

And that’s why the banks are desperate to get the government to butt out.

Ah well, a word of advice to Mr. Hester and Mr. Daniels successor, António Horta-Osório …

When the government sells your banks back into the private sector, take their profits in 2014 and get re-elected into office once more, stand by for your Knighthoods.

I’m sure even Sir Francis Drake would have been impressed that the government at least chose a Portuguese leader to Knight for services to their bank.

 

About Chris M Skinner

Chris M Skinner
Chris Skinner is best known as an independent commentator on the financial markets through his blog, the Finanser.com, as author of the bestselling book Digital Bank, and Chair of the European networking forum the Financial Services Club. He has been voted one of the most influential people in banking by The Financial Brand (as well as one of the best blogs), a FinTech Titan (Next Bank), one of the Fintech Leaders you need to follow (City AM, Deluxe and Jax Finance), as well as one of the Top 40 most influential people in financial technology by the Wall Street Journal’s Financial News. To learn more click here...

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