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RBS chief: Taxpayers must profit from bank bailout

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RBS chief: Taxpayers must profit from bank bailout

Stephen Hester says taxpayers can and should make a profit on the banking bailout, but  new Treasury Committee chairman, Andrew Tyrie, says the government should instead focus on improving competition.  

The UK taxpayer can and should make a profit on the banking bailout, Royal Bank of Scotland chief executive Stephen Hester said today.  

'On the issue of unwinding public support for the banking system, it is clearly in the public interest that this be successfully achieved and at a profit to the public purse,' Hester told the annual British Banker's Association conference, adding he believes this is 'achievable'.

The head of the 83% state-owned bank gave no further details. There have been reports that the government is planning to sell shares in the part state-owned banks at a discount to the public. RBS chairman Philip Hampton has said he believes the government will start selling its stake in 2011.

RBS shares rose above the price the government paid for its stake in the spring. That fuelled speculation the government would sell shares as soon as this year but recent concerns about European government debt and worries about the global economy have pulled shares lower and the rumours have died down.

Competition over profits

But Andrew Tyrie, chairman of the Treasury Committee, said he hopes the government will not focus on how much money it can make from selling the stakes and should instead understand the benefits of increasing competition in the UK.

'I hope the government prioritises competition over yield,’ he said.

Tyrie said forsaking an immediate capital gain would improve competition and be better for consumers who have less choice since a number of banks and building societies merged and some lenders exited the UK market. 

Sharing the blame

Both men also made it clear that banks they believe banks were not solely responsible for the financial crisis.

The RBS chief said that while the initial 'political and media anger' towards banks was understandable, consumers also played their part and reducing future risk is down to all sectors of society.

'Banks were not the only players.  Everywhere it suited consumers to be able to consume more, to see housing values increase, to enjoy higher public spending based on buoyant tax revenues,' he said.

Tyrie agreed. 'It is time to recognise all of us played our part. Corporates and individuals also share the blame for irresponsible borrowing,' he said.

Big banks

While the UK government has set up a commission to look at banks, and business secretary Vince Cable still believes banks should be made smaller, Hester thinks such a step is unnecessary.

Hester, like HSBC chairman Stephen Green earlier in the day, said there were a number of common causes of bank failure during the crisis but said one thing that was 'emphatically not a common factor was the size, shape or diversity of failed banks'. Nor was excessive speculating and proprietary trading activities, he said.

Green said the failure of both Northern Rock and Bear Stearns during the crisis showed that banks of different sizes and with different activities were equally vulnerable.

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