But George Osborne confirmed the government will implement the Vickers Commission’s ring-fence proposal and said that semi-nationalised Lloyds had never faced any intervention to alter its sale of 632 branches.
During his formal response to Vickers’ report, Osborne said: “I believe RBS needs to go further, and the management agrees. We are the largest shareholders. Let me set out our view... RBS’s future is as a major UK bank, with the majority of its business in the UK and in personal, [small business] and corporate banking.”
That means it must downsize its investment bank by more than chief executive Stephen Hester had stated and marks the first time a government has openly used its shareholding to lay out political goals for a bank’s management.
But it brings Osborne closer to an increasing number of analysts who believe that much of RBS is un-recoverable and that taxpayers are unlikely to make back their investment, which has so far delivered a paper loss of £27bn.
The Treasury’s statement on Vickers also confirmed that it had never intervened to “substantially enhance” Lloyds’ sale of 632 branches. It had originally been asked to seek a deal with the bank to make it sell more branches, but City A.M. revealed in May that it did not intend to act on the proposal.
Yesterday it said finally: “Execution of the divestment is a commercial matter for Lloyds... The government does not intend to use its shareholding in Lloyds to deliver an enhancement of the divestment.” Peter Vicary-Smith of consumer group Which? said: “Lloyds... needs to be forced to sell more branches.”