Why can't we just keep RBS?

Ricochet J · 8 Mar 2011 at 20:43

The Government owns 83% of RBS. A report will be drafted by government officials and handed to the Government in September about the best strategy to sell its RBS share.

Why can't the Government keep RBS? Surely any profits made will go directly to the Government? Or is it a case of:
"We need cash, and we need it now. Let's sell our assets."

Did the Government officially guarantee it would sell its shares?

Greebo · 8 Mar 2011 at 20:45

Same reason we sold off a lot of our assets in the 80's. We need the money. Simples.

Redgie · 8 Mar 2011 at 20:46

I have no real insight into this side to politics (Or any side for that matter), but as this is GD and not the SC, I will chirp in with one point. The girl at RBS is pretty fit, but has said she's leaving when it turns into Santander.

This makes me a sad panda

DBT85 · 8 Mar 2011 at 20:47

All the time the govt has that much influence over one or two banks when the rest have more freedom that bank will never do as well as it can. Sad but true.

Cosimo · 8 Mar 2011 at 20:48

Greebo said:
Same reason we sold off a lot of our assets in the 80's. We need the money. Simples.

.... and a government does not want to be involved in the banking business.

naefeart · 8 Mar 2011 at 20:49

The Gov can't run a business, successfully. I will be surprised if they manage to make any money when they offload RBS.

Vonhelmet · 8 Mar 2011 at 21:41

naefeart said:
The Gov can't run a business, successfully. I will be surprised if they manage to make any money when they offload RBS.

Don't talk soft, of course they'll make money. They bought the shares when the bank was in the toilet and the shares were cheap.

A more interesting question is whether the government will pay capital gains tax on the disposal.

scorza · 8 Mar 2011 at 21:47

There's no reason why we can't keep some of the shares - 83% is too much but the government retaining a shareholding of 20-30% would be entirely appropriate. The French government do this as a matter of course for companies it deems of strategic national importance, one of the German states owns around 25% of Volkswagen. Basically just to keep an eye on things and get some representation on the board.

I don't think anyone could disagree that the banks are in this country's strategic national interests given that their failure almost brought down the entire global economy.

Duke · 8 Mar 2011 at 21:52

I don't think the EU will let them? And no doubt it will become bloated if left too long in public ownership.

naefeart · 8 Mar 2011 at 22:36

vonhelmet said:
Don't talk soft, of course they'll make money. They bought the shares when the bank was in the toilet and the shares were cheap.

I mean make any real money. Obviously they'll make something. My concern is they won't capitalise on this. They'll get rid asap. That's what they do.

Eriedor · 8 Mar 2011 at 23:16

vonhelmet said:
Don't talk soft, of course they'll make money. They bought the shares when the bank was in the toilet and the shares were cheap.

A more interesting question is whether the government will pay capital gains tax on the disposal.

Actually it's not toilet. The shares are still 3-4p below what the government bought in at. This public knowledge means there is a false ceiling to the shares price because people know that in time the market could be flooded with shares once the price exceeds the governments buy in.

Greenlizard0 · 9 Mar 2011 at 00:31

Redgie said:
I have no real insight into this side to politics (Or any side for that matter), but as this is GD and not the SC, I will chirp in with one point. The girl at RBS is pretty fit, but has said she's leaving when it turns into Santander.

This makes me a sad panda

*looks at location*

Yeap agree with that.

Vonhelmet · 9 Mar 2011 at 08:22

Eriedor said:
Actually it's not toilet. The shares are still 3-4p below what the government bought in at. This public knowledge means there is a false ceiling to the shares price because people know that in time the market could be flooded with shares once the price exceeds the governments buy in.

I stand corrected.

Theophany · 9 Mar 2011 at 08:38

Ricochet J said:
The Government owns 83% of RBS. A report will be drafted by government officials and handed to the Government in September about the best strategy to sell its RBS share.

Why can't the Government keep RBS? Surely any profits made will go directly to the Government? Or is it a case of:
"We need cash, and we need it now. Let's sell our assets."

Did the Government officially guarantee it would sell its shares?

The government cannot effectively run a business as public ownership firms have no profit incentive nor any drive to innovate. Managing a corporate entity is not in the government's remit imho.

Public sector industries have notoriously been under capitalised too, so it wouldn't surprise me if it is quite a while yet before the government makes any profits on the sale of denationalising RBS worth talking about. When 50% of BT was sold off in 1984 the shares floated were sold at about 10% less than their market value, which ended up being a common theme amongst all the privatisations that followed. So whilst RBS shares may be less than they were worth when originally purchased, I wouldn't be surprised to see the government sell them for even less just to get them out of the books.

edscdk · 9 Mar 2011 at 08:45

the government is a vast money wasting machine, the waste is not on a normal level it has to be on a mental level, at all levels resourses and money must be thrown away and wasted as fast as possible.... this does not have the ability to run a profit making enterprise so it cannot run a bank...

scorza · 9 Mar 2011 at 08:59

The government isn't running any bank, it just owns some of them. One thing we should all agree on is that the banks in their current form aren't capable of running themselves either.

b.cummins · 9 Mar 2011 at 08:59

Ricochet J said:
The Government owns 83% of RBS. A report will be drafted by government officials and handed to the Government in September about the best strategy to sell its RBS share.

Why can't the Government keep RBS? Surely any profits made will go directly to the Government? Or is it a case of:
"We need cash, and we need it now. Let's sell our assets."

Did the Government officially guarantee it would sell its shares?

The government would offer assurances that it would not keep the shares. It's a very dangerous political field for a party in power to hold a stake in a bank; the most for profit organisation out there. It could go one of two ways; either the government must be seen to maintain its impartiality, which is simply not feasible when running a profitable finance enterprise, or the government would be seen to be using a financial institution to drive its own goals, which would eventually veer on corruption.

From a different perspective however, having worked inside the enterprise in question, I can definitely tell you right now it's a toxic asset. It was before the bailout and it still is. There is an incredible degree of inefficiency, but then the failures of the business are akin to the gaping inefficiencies and wastage you see in sub-contractors to government institutions across the UK (for example, catering in the military).

Seeing as now the business is being carved up, it wouldn't surprise me if the government buys out of it's shares for a quicker (but smaller) profit and the remaining shreds are left to die out or be sold off in a complete dissolution of the company.

benneh · 9 Mar 2011 at 09:16

Because the Jews.

amrite?

CharlieAlbert · 9 Mar 2011 at 09:25

because all you know is what the media have told you. You dont know the ins and outs of the agreement to why government bailed out rbs. Thats why the government cant keep rbs.

Admiral Huddy · 9 Mar 2011 at 09:38

vonhelmet said:
Don't talk soft, of course they'll make money. They bought the shares when the bank was in the toilet and the shares were cheap.

Agreed. All the controversy around the bail-outs but they were never really going to loose long term.