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George Osborne to sell off RBS

The Financial Times has reported that George Osborne is to start selling the state’s £32 billion stake in the Royal Bank of Scotland at a loss, telling a City audience that delay would be bad for the economy, taxpayer and bank.

George Osborne said the Government will start to sell some of its 80 per cent stake in RBS to institutional investors in the coming months, as part of a rehabilitation of the rescued lenders that will produce an overall profit of £14 billion for the taxpayer, according to new figures[1].

RBS was the country’s most high-profile victim of the crash, being at the time the biggest bank in the world. The 45 billion injected into RBS by Gordon Brown’s Labour Government represented the largest bank rescue of the time, while its £24 billion net loss for that year was the worst in British corporate history. Thus the £32 billion value of the RBS stake is far less than the 2008 bail out. However Osbourne, after commissioning a report from investment bankers at Rothschild and seeking advice from BoE governor Mark Carney, confirmed that RBS shares may never return to their pre-crisis level and the current share price “fairly reflects the fundamental value of the bank”.

According to the Guardian, the shares will be sold to major City institutions in the coming months. An offer for members of the public, as has been promised for Lloyds Banking Group, could follow. Osborne also backed a move by the Bank of England governor Mark Carney to impose tougher punishments on bankers who rig markets. Carney warned City traders they should face up to 10 years in jail for abusing markets as he pledged to end “the age of irresponsibility” that has gripped the financial sector[2].

[1] Marion Dakers, Financial Services Editor, “George Osborne ready to sell off RBS at a loss” www.thetelegraph.co.uk
[2] Jill Treanor, “George Osborne signals RBS selloff in Mansion House speech”, www.the guardian.com