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Risk that RBS and Lloyds state aid is 'never recovered'

The UK risks losing the £66 billion poured into banks during the crisis because the government lacks the necessary firepower for a sale, the Commons Committee of Public Accounts warned.

 
Risk that RBS and Lloyds state aid is 'never recovered'

The UK may never recoup the £66 billion poured into the rescue of Royal Bank of Scotland and Lloyds, MPs have warned.

A cross-party committee of MPs warned that the bailout of some high street lenders during the financial crisis was unlikely to translate into a quick return of the funds, pointing to the botched handling of Northern Rock's rescue and sale.

During the crisis the government helped support banks including Lloyds by buying its shares and eventually amassing sizable stakes in lenders. But the Commons Committee of Public Accounts said the £66 billion spent 'may never be recovered' and added the sale of Northern Rock showed UK leaders lacked the skills and resources to secure a sale.

The MPs' comments were made in the committee's report into the creation and sale of Northern Rock, in which it was reminded the rescue of this bank alone was likely to cost the taxpayer £2 billion.

MP Margaret Hodge, who chairs the Committee of Public Accounts, also pointed to the lack of competition within the banking sector and identified this as a crucial hurdle the government had to overcome.

She said: 'The lack of competition does not fill us with confidence the taxpayer will make a profit on the sale of the two banks which remain in public ownership, RBS and Lloyds. There is a risk that the £66 billion invested in RBS and Lloyds may never be recovered.'

In the case of Northern Rock Hodge pointed out the Treasury was slow to nationalise the bank and as a result making a loss on its sale to Virgin Money was 'difficult' to avoid.

The MPs' bleak analysis comes just weeks after RBS told the market it was ready to leave a government asset protection scheme, with its boss Stephen Hester lauding the move as a significant step forward in the bank's recovery from the crisis.

11 comments so far. Why not have your say?

Lucky me

Nov 16, 2012 at 12:47

Comes as no surprise really. I was wondering how we were all going to benefit if they ever managed to sell the shares at a profit in any case. I just imagined that the proceeds would disappear into some treasury void and we just write it off to experience. After all what's a few billion between friends?

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steven fieldfare

Nov 16, 2012 at 12:55

Even if these banks manage to prosper, and successful times emerge, shareholder litigation will probably never go away; especially in the case of Lloyds with its acquisition of Halifax without due diligence.

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Mike R

Nov 16, 2012 at 13:12

Well where is this 66 Billion of Taxpayers money going?? a lot of it is going into the pockets of Hedge Funds as they ply their daily movement of the SP. Investors are staying clear of this market place at the moment as any investment will show little return. Daily the media generated bad news, everything from Eurozone to global economies, to another world conflict as well as politics take their toll and feed the speculators.

The PPI mis selling has also been allowed by Government to run, and feed ambulance chasers, while knawing away at the banks attempts to solve their in house problems.

And now we have a Government committee stating the obvious.

Yes Govt. acted either foolishly or too late or without adequate knowledce in the first place. But they are compounding this situation by again not acting and inadequate knowledge. Is UKFI just another Quango or was it set up to advise Govt.. The inaction and continued Bank bashing will ensure the maximum loss.

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joe stalin

Nov 16, 2012 at 13:23

What a load of nonsense! But the Govt should look to further than themselves top work out why the shares are still not back to the original purchase price. Banker bashing has been a convenient excercise to provide a smoke screen from Coalition inaction and wrangling and incompetent government. Red tape and ludicrous attempts at regulation have further hindered price recovery. it is in fact astonishing that prices have recovered to the levels they have. The Govt and the regulators have yet to understand what really happened 4 years ago. If they did understand then they would not be so preoccupied with inventing new padlocks to put on old padlocks on the stable door which has been long shut and the horse that has left it is about as easy to find as Shergar. The govt and the regulators can congratulate themselves on a sterling job which is currently worth £66bn or so in unrealised losses to the tax payer and as such ranks alongside that other great achievement by a past Chancellor who managed to sell our gold deposits at the bottom of the market. The point of course here is that the loss is unrealised. If the muppets back off the banks and start trying to find out what really happened then in a year or so we the tax payers may actually see a profit on our investment. Geez even the Obama administration has managed to do that and they did not even save the universe which of course was done as we all know by Flash Gordon (brown) of gold fame

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William Bishop

Nov 16, 2012 at 16:12

It seems to me unlikely that a committee of MPs has a clearer view of the medium-term future for these banks than anyone else.

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Jon

Nov 16, 2012 at 17:50

Anyway the proceeds of any sale belong to the shareholders. The taxpyer did NOT bail out the banks, but made a huge profit form the taxes collected as the money the banks lost was spent. Trouble is that Brown boasted that the rise in GDP was a sign of prosperity, and spent all of this extra tax (and more) so there was none left in the kitty to hand back to the banks.

The shareholders took the brunt of the losses. In effect there was a transfer of capital wealth from the shareholders to the Treasury.

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Ed the 5th

Nov 16, 2012 at 18:47

Instead of not allowing banks like these to fail, banks like these should never have been allowed to survive.

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Frankie Dee

Nov 16, 2012 at 21:52

On Wickipedia it says the average price the government paid for Lloyds shares was 74P I have a sizeable chunk of LLoyds shares I am optomistic that within 3 years we will see £1 providing the bank bashers go away.

I cannot understand why as majority shareholders HMG put up with bank bashing LIBOR from my view did no harm but probably saved Barclays ending up in government hands PPI is an ambulance chasers dream the main legacy being plenty more multi millionaire Lawyers these situations will run their course then the SP will climb and soon.

If you read LLoyds last figures PPI was the only thin stopping te bank making a good profit my only concern is home repossesions but even this wont touch the cost of PPI.

I am sure the government will get their 74p I really cant understand the report.

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Ian Phillips

Nov 16, 2012 at 22:40

"She said: 'The lack of competition does not fill us with confidence the taxpayer will make a profit on the sale of the two banks which remain in public ownership, RBS and Lloyds. There is a risk that the £66 billion invested in RBS and Lloyds may never be recovered.' "

The Taxpayer doesn't own these two Banks,they are not in public ownership, they can't sell them, they are just share holders..............stupid woman!! (Well she is an MP!)

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MOGO

Nov 18, 2012 at 15:54

But the government, ie joe public, are the major shareholders, therefore in the unlikely event that these 2 banks do recover, we would make a profit.

But I agree with an earlier comment, why should we think a bunch of MP's are any wiser than anyone else.

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steven fieldfare

Nov 18, 2012 at 19:19

For MOGO

But we, the shareholders, are also Joe Public and this member of the public will not make a profit unless my LTSB shares top 5.65.

Given the outrageous risks taken by Blank and Daniels, in acquiring HalifaxBoS without doing any homework, and pushing it through with institutional majority support from those invested also in Halifax, I would argue that any taxpayer "profit" should properly go first to those LTSB shareholder taxpayers who were misled by the Government engineered takeover of bankrupt Halifax. After all, it was in sound LTSB where their investment was made.

This problem will not go away as Lloyds Action Now have repeatedly made clear.

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