Edinburgh: Business Minister Vince Cable is urging the chancellor to consider breaking up the Royal Bank of Scotland to boost competition in the financial sector instead of dashing to privatise the bailed-out lender.
After reports that George Osborne hoped for a quick selloff, Cable said: “I don’t see the need for any haste.”
Sir Philip Hampton, the bank’s chairman, said that the cleanup of RBS would be “substantially complete” by 2014, allowing the Treasury to start selling shares before the general election. But Cable is keen to ensure that all options remain open, including breaking the bank up. “There’s a lot to be said for the idea of using RBS to create a more competitive banking sector,” he said. Insiders have argued that splitting up RBS would create insurmountable legal and practical problems, but Cable said: “You probably could create separate entities and I’m sure that would be healthy.”
Encouraging competition in banking is a key aim of the coalition and ministers were disappointed by the collapse last month of a deal under which the Co-operative Bank sought to buy more than 600 branches from Lloyds Banking Group, creating a powerful mutually owned “challenger bank”.
Cable said consumers and businesses had been left with even less choice than before the financial crisis. “It’s become very, very narrow, and it almost entirely consists of shareholder banks,” he said. RBS was bailed out by Alistair Darling, the then Labour finance minister, in the financial crisis in late 2008. It required two fresh recapitalisations in 2009, receiving a total of £45bn.
With lending to small businesses in Britain’s recession-scarred economy still falling, despite a series of government initiatives, the future of RBS has become a fraught political issue. Senior figures, including the archbishop of Canterbury and former Tory chancellor Lord Lawson, have called for it to be broken up into a “bad bank”, with legacy loans from the boom years, and a “good bank” that would then be free to make new loans.
Guardian News
