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 Images
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The Fire Brigades Union reaffiliates to Labour - what does it mean?

Any union rejoining Labour will be welcomed by most in the party - but the impact on the party's internal politics will be smaller than you think.

The Fire Brigades Union (FBU) has voted to reaffiliate to the Labour party, in what is seen as a boost to Jeremy Corbyn. What does it mean for Labour’s internal politics?

Firstly, technically, the FBU has never affliated before as they are notionally part of the civil service - however, following the firefighters' strike in 2004, they decisively broke with Labour.

The main impact will be felt on the floor of Labour party conference. Although the FBU’s membership – at around 38,000 – is too small to have a material effect on the outcome of votes themselves, it will change the tenor of the motions put before party conference.

The FBU’s leadership is not only to the left of most unions in the Trades Union Congress (TUC), it is more inclined to bring motions relating to foreign affairs than other unions with similar politics (it is more internationalist in focus than, say, the PCS, another union that may affiliate due to Corbyn’s leadership). Motions on Israel/Palestine, the nuclear deterrent, and other issues, will find more support from FBU delegates than it has from other affiliated trade unions.

In terms of the balance of power between the affiliated unions themselves, the FBU’s re-entry into Labour politics is unlikely to be much of a gamechanger. Trade union positions, elected by trade union delegates at conference, are unlikely to be moved leftwards by the reaffiliation of the FBU. Unite, the GMB, Unison and Usdaw are all large enough to all-but-guarantee themselves a seat around the NEC. Community, a small centrist union, has already lost its place on the NEC in favour of the bakers’ union, which is more aligned to Tom Watson than Jeremy Corbyn.

Matt Wrack, the FBU’s General Secretary, will be a genuine ally to Corbyn and John McDonnell. Len McCluskey and Dave Prentis were both bounced into endorsing Corbyn by their executives and did so less than wholeheartedly. Tim Roache, the newly-elected General Secretary of the GMB, has publicly supported Corbyn but is seen as a more moderate voice at the TUC. Only Dave Ward of the Communication Workers’ Union, who lent staff and resources to both Corbyn’s campaign team and to the parliamentary staff of Corbyn and McDonnell, is truly on side.

The impact of reaffiliation may be felt more keenly in local parties. The FBU’s membership looks small in real terms compared Unite and Unison have memberships of over a million, while the GMB and Usdaw are around the half-a-million mark, but is much more impressive when you consider that there are just 48,000 firefighters in Britain. This may make them more likely to participate in internal elections than other affiliated trade unionists, just 60,000 of whom voted in the Labour leadership election in 2015. However, it is worth noting that it is statistically unlikely most firefighters are Corbynites - those that are will mostly have already joined themselves. The affiliation, while a morale boost for many in the Labour party, is unlikely to prove as significant to the direction of the party as the outcome of Unison’s general secretary election or the struggle for power at the top of Unite in 2018. 

Stephen Bush is editor of the Staggers, the New Statesman’s political blog.