THE BRITISH government will invest a further £30 billion into the UK’s two biggest troubled banks, which will both have to sell off significant parts of their operations to meet European Commission concerns.
The sell-offs by RBS and the Lloyds Banking Group, which are to be completed by 2013, will see nearly 10 per cent of the UK retail banking market available to international banks and to companies seeking to expand, such as Tesco and Virgin.
However, the sale will not affect RBS’s Ulster Bank operations in Ireland, a spokesman told The Irish Times yesterday, since RBS’s share of the Irish market through Ulster is not enough to raise issues with the commission.
Lloyds will escape becoming covered by the British government’s loan guarantee scheme as a result of raising £14 billion from investors, although the chancellor of the exchequer will take a further £5 billion shareholding.
However, Lloyds will have to pay a £2.5 billion fee to recognise the de facto insurance cover it has enjoyed since last February when the chancellor, Alistair Darling, first offered to insure its loan book.
Lloyds will sell all of its Scottish Lloyds TSB operation, and 250 of its Lloyds TSB branches in England and Wales, along with 160 Cheltenham Gloucester mortgage company branches – totalling about 20 per cent of its branch network and 5 per cent of its deposit base.
RBS, which was described yesterday by treasury minister Lord Paul Myners as “the worst-managed bank in history”, will get a £25 billion investment from the government – taking the taxpayers’ stake to 84 per cent.
RBS will sell its Scottish NatWest operation and the former Williams Glyn’s banking business, along with its insurance arm, including companies such as Direct Line, Churchill and Privilege.
Meanwhile, it will pay the British government £700 million to be covered by the insurance scheme – the only bank to be now so insured, along with agreeing to pay a £2.5 billion exit fee when it finally does quit it.
Conservative Party shadow chancellor George Osborne said Mr Darling was now putting another £40 billion of taxpayers’ money into the banks when one adds a £10 billion tax write-off allowed under the plan into account.
The two banks have agreed not to pay bonuses this year to staff earning below £39,000. Bonuses due to board members will be deferred until 2012, but not abolished outright.
The bonuses’ decision, RBS said last evening, would make the job of recruiting and retaining staff “even tougher” as reorganisation takes places, though it accepted it reluctantly.
Taxpayers’ exposure to bank losses has been cut by £300 billion by Lloyds’ departure from the insurance scheme, the Chancellor said, adding that it would increase High Street competition and offer a “better deal” for the public.
Yesterday’s package will deliver £500 million in fees for UBS and Merrill Lynch, which acted as advisers for Lloyds; Morgan Stanley and UBS, which acted for RBS; and Credit Suisse and Deutsche Bank, which advised the treasury.
