Why is the RBS fine so small?

What is £400m for a bank bailed out to the tune of £45bn?

So, now we know. The guessing game is over and Royal Bank of Scotland (RBS) has been hit with a fine of £400m for its role in the LIBOR-rate rigging scandal.

It may sound a lot but don’t be kidded, don’t be conned. RBS is, after all, a firm with annual revenue of around £30bn. To put the size of the fine in context, it has already set aside £1.7bn (and rising) to cover the cost of claims for mis-sold payment protection insurance (PPI).

What is another £400m between friends for a bank bailed out to the tune of £45bn?

Taxpayers currently have the dubious distinction of holding around 81 per cent of shares in RBS with the government having paid the equivalent of just over £5 per share.

With a current share price of £3.40, the government is sitting on paper losses of just under £15bn.

As Vince Cable has gloomily but accurately forecast, early hope for RBS being re-privatised is no more than a “distant dream.”

There is however one thing that the UK government could do and do quickly. It could stop pussyfooting about over RBS’ US-based subsidiary, Citizens Bank.

Citizens, headquartered in Rhode Island, operates in 12 US states; it is a top 20 US bank with assets of $132bn, around 1,400 branches and a staff of 19,000 employees.

To date, RBS has resisted calls to sell Citizens, despite interest shown in its US unit from a number of banks.

Canada-based Toronto-Dominion and Brazil’s Itau-Unibanco have, from time to time, been linked with an interest in snapping up Citizens. US-based PNC is another potential bidder.

Analysts forecast that if Citizens was on the block, it might fetch around £7.5bn. The party line from RBS has, to date, taken the line that Citizens is a core asset and not for sale. Poppycock.

RBS will, eventually, have to bow to the inevitable and cash in its Citizens chips. It is now time for the government, via UK Financial Investments Limited, the organisation set up immediately after the October 2008 bailouts of Lloyds and RBS, to bear its teeth.

It could start by leaning heavily on RBS to focus on getting its domestic market in order and sell off Citizens.

Photograph: Getty Images

Douglas Blakey is the editor of Retail Banker International

Photo: Getty
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If the cuts are necessary, where's Philip Hammond's deficit target gone?

The Chancellor ripped up his predecessor's plans and has no plan to replace them. What's going on?

Remember austerity?

I’m not talking about the cuts to public services, which are very much still ongoing. I’m talking about the economic argument advanced by the Conservatives from the financial crisis in 2007-8 up until the European referendum: that unlesss the British government got hold of its public finances and paid down its debt, the United Kingdom would be thrown into crisis as its creditors would get nervous.

That was the rationale for a programme of cuts well in excess of anything their coalition partners, the Liberal Democrats, campaigned on in the run-up to the 201 election. It was the justification for cuts to everything from English language lessons to library hours. It was the stick used to beat Labour in the 2015 election. Now it justifies cuts to payments to families that lose a parent, to mental health services and much else besides.

Which is odd, because there’s something missing from this election campaign: any timetable from the Tories about when, exactly, they intend to pay all that money back. Neither the government’s day-to-day expenditure nor its existing debt can meaningfully be said to be any closer to being brought into balance than they were in 2010.

To make matters worse, Philip Hammond has scrapped George Osborne’s timetable and plan to secure both a current account surplus and to start paying off Britain’s debts. He has said he will bring forward his own targets, but thus far, none have been forthcoming.

Which is odd, because if the nervousness of Britain’s creditors is really something to worry about, their causes for worry have surely increased since 2015, not decreased. Since then, the country has gone from a byword for political stability to shocking the world with its vote to leave the European Union. The value of its currency has plummetted. Its main opposition party is led by a man who, according to the government at least, is a dangerous leftist, and, more to the point, a dangerous leftist that the government insists is on the brink of taking power thanks to the SNP. Surely the need for a clear timetable from the only party offering “strong and stable” government is greater than ever?

And yet: the government has no serious plan to close the deficit and seems more likely to add further spending commitments, in the shape of new grammar schools, and the possible continuation of the triple lock on pensions.  There seems to be no great clamour for Philip Hammond to lay out his plans to get the deficit under control.

What gives?

Could it all, possibly, have been a con to advance the cause of shrinking the state?

Stephen Bush is special correspondent at the New Statesman. His daily briefing, Morning Call, provides a quick and essential guide to British politics.

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