A knighthood freshly shredded, bonuses dumped (well, two bonuses), – RBS/NatWest is back to centre stage again where it would rather not be. Because therein lurks the real problem that won’t go away.
The problem? The growing realisation that the pretence is not working. The simple fact is that RBS/NatWest is dead private meat. It will never actually be private again. Some people have got to get used to this.
The taxpayer will never get out (as the loss on sale to the private sector would run into tens of billions of pounds) and any talk about the “return” on capital invested here is a laughable proposition.
Those who seek to judge in simplistic terms that the taxpayers’ £45 billion can be assessed against the current market value of the product they bought are co-conspirators in the desperately hopeful pretence.
To be precise, the estimated current market value of the £45 billion we are into is probably now no more than £21 billion (and that’s being generous).
The National Audit Office website has a handy answer to the question of whether we will get our money back. “It is likely that a substantial proportion of these schemes and investments will be with us for some time and the eventual profit or loss to the taxpayer will not be known until all the support is removed, the loans repaid and the shares sold.”
The NAO itself clearly is tasked with looking at this from only one angle (as a balance sheet/profit & loss auditor). Even the NAO admits it is a big ask to get out of this any time soon.
The NAO also acknowledges what is frequently missed: the share purchases in RBS/NatWest were only a small part of the entire amount put at risk by the UK taxpayer. The Asset Protection Scheme and contingent liabilities involved the UK taxpayer putting up £210 billion just to keep the bank trading.
If the banking crisis in Europe continues to get worse and RBS/NatWest gets sucked in, then that money is at risk. So £255 billion is the real RBS/NatWest bill.
Those who simply cannot remove the private sector spectacles and state that the recovery of the share price is what must drive our concerns, because this will enable a sale, are citizens of Lah Lah land.
This is what leads to support for bonuses in the public sector banks, because such things make it look like, feel like, good old proper RBS/NatWest – a real private sector bank again. They desperately want to believe again.
The completely discredited business concept of shareholder value – that the best way to run a business is to drive the entire business based on outputs to the shareholder – is one of the things that got us all into the mess we are in.
And I get a hint of this in current defenders of the RBS/NatWest shareholder-return model. UKFI (the taxpayers’ representative in RBS/West) also seems to believe this model, too.
I would suggest that the taxpayer is not interested in the share price of the bank at all. The taxpayer wants the investment in the bank returned in a real way.
They would like the bank they own to behave like a bank the taxpayer owns. Not like a bog standard bank a few hedge funds and sovereign wealth funds own.
In other words, the taxpayer wants the wider health of the economy and businesses and people to be what drives the bank’s operations: not its share price.
I repeat – let’s get real: the bank must be taken off a private sector footing now, and be run as a nationalised public sector bank which is tasked with getting lending out into businesses, particularly small businesses, and based in the regions. Any other approach is simply putting the real investment of the taxpayer at even greater risk.
