£66bn spent on saving Lloyds & RBS may never be recouped
With shares in the two banks still trading at a heavy discount, taxpayers may have lost their investment
BRITISH taxpayers might never see the return of £66bn of public money used to rescue Royal Bank of Scotland (RBS) and Lloyds Banking Group in 2008, an influential group of MPs said yesterday.
The Public Accounts Committee, Parliament's spending watchdog, warned it was unlikely the government would be able to sell its stake in the two nationalised banks for the price it paid "any time soon", reports the Financial Times.
Shares of both RBS and Lloyds are still trading at a heavy discount to what they were worth when both banks were bailed out in 2008, leaving the government with the stark choice of holding on to the shares indefinitely or selling them and taking a loss.
How much taxpayer's money can be recouped also depends on the bedding down of new financial regulations, the pace of economic recovery in the UK and eurozone, and greater competition in the banking industry, according to the committee.
While essentially investigating the sale of Northern Rock to a conglomerate including Virgin Money and US financier Wilbur Ross, the committee said "lessons may read across" for the divestment of the two larger banks.
The Guardian reports that Treasury officials admitted Northern Rock should have been nationalised more quickly, rather than in February 2008, five months after the run on the bank.
The sale of Northern Rock, which only received two bids, had illustrated the difficulties faced by the government. Virgin invested only £1.4bn into buying the bank, leaving taxpayers £469m out of pocket.
Yesterday's warning from the committee followed a National Audit Office report published in May which warned that taxpayers faced further losses of £2bn through continued ownership of Northern Rock's so-called "bad bank" - the loss-making elements of the business that were "hived off" before its sale to Virgin.