RBS set for biggest privatisation in UK history
US regulators impose $4.9bn penalty and pave way for Government to sell its 70% stake
The long-awaited sell-off of Royal Bank of Scotland is to get the green light from the Treasury after the bank agreed a penalty from the US regulator for selling toxic mortgage bonds in the run-up to the financial crisis.
US regulators handed RBS a $4.9bn (£3.6bn) penalty, more than the $3.6bn (£2.7bn) contingency fund set aside to pay the fine, but less than many experts had predicted.
The fine means the way is now clear for the Government to begin selling off its 71% stake in the bank it nationalised at the height of the financial crisis in 2008.
Jane Sydenham, investment director at Rathbones, said the deal with US regulators represents “an important turning point” for the bank. "It... puts the Treasury in a much clearer position to sell their stake, as buyers would be reluctant if there were still significant fines to pay,” he said.
BBC business editor Simon Jack agreed the financial penalty for RBS’s role in the crisis had been the “last obstacle” standing in the way of selling the Government’s enormous stake back to the private sector in what will be “the biggest privatisation in UK history”.
The question which could determine whether the sell-off is deemed a success is how much the Treasury will make from the sale. Will taxpayers get all their money back ten years on from nationalisation?
Based on current valuations, the Government’s stake is worth around £20bn in shares. This will take several years to sell off, and while the first sales will be at a loss, Jack says the Government will hope that “over time, as the huge overhang of shares to sell dwindles and profits continue to rise, the public may get more money back”.
He notes, though, that the public are unlikely to ever recoup the £45bn poured into what he describes as “the biggest banking debacle in UK corporate history”.