An influential committee of MPs was puzzled yesterday by the revelation that some of the City’s biggest firms had charged the government just £1 for handling the sale of shares in Royal Bank of Scotland and Lloyds.
Top officials from UK Financial Investments (UKFI) – the body that manages the government’s stake in the lenders – told the Treasury Select Committee that it had paid Goldman Sachs and UBS just £1 for services that otherwise would have brought in millions for the investment banks.
However, UKFI chairman James Leigh-Pemberton told MPs: “I don’t think it was cheap. On our valuation analysis it wasn’t cheap, nor was it cheap compared to the market price on the day.”
Committee chair Andrew Tyrie called the fees a “rather extraordinary arrangement”.
Chris Philp, another Tory MP, said: “I’ve never encountered an outfit like Goldman Sachs or Morgan Stanley acting in a charitable manner.
“Please be ultra-vigilant,”he told Leigh-Pemberton and the company’s head of market investments, Oliver Holbourn.
Fellow Tory Steve Baker agreed, saying: “Many of my constituents would join me in regarding in the utmost astonishment that the same organisations that have been fined for repeat rapacious misconduct are now the jolly good chaps.”
Goldman Sachs refused to comment on the matter of its fee.
However, a source close to the deal told City A.M. that it was not surprising that the banks would work for such a low fee, given that a high-profile, successful sale would help them secure future lucrative business.
The committee also grilled UKFI on the loss on the sale of the government’s RBS stake.
Holbourn said stock markets in the US and Europe were close to record highs when George Osborne decided to sell the shares, and it was wrong to assume that delaying a sale would have led to a higher price.