Cameron calls for faster RBS reform

British Prime Minister David Cameron wants the Royal Bank of Scotland to speed up reforms at the state-controlled bank

Story highlights

  • David Cameron raises pressure on Royal Bank of Scotland to "accelerate" reforms
  • UK Prime Minister privatization ideas echo Margaret Thatcher privatizations of 1980s
  • Cameron becoming frustrated with pace at which bank was being restructured
  • Cameron: RBS "a very badly damaged institution but doing the right thing"

David Cameron has increased the pressure on Royal Bank of Scotland's chief executive to "accelerate" reforms at the state-controlled bank amid fresh speculation about a mass offering of its shares to the public.

The UK prime minister, speaking on a three-day visit to India, said the idea of a "Tell Sid" privatisation of RBS -- echoing the Thatcherite privatisations of the 1980s -- was one of a number of "interesting questions for the future".

But he made clear he was becoming frustrated with the pace at which the bank, led by chief executive Stephen Hester, was being restructured and its value rebuilt.

"The first job is to turn around the performance of RBS and to strengthen its balance sheet, strengthen its business and that's what Stephen Hester is doing," Mr Cameron said. "But I am keen to examine all possibilities for what we can do to put RBS, in time, back into the private sector.

"It's a huge undertaking, it was a very badly damaged institution, but I think they are doing the right thing ... obviously we want them to, where possible, accelerate the adjustments that they are making in terms of making it a strong organisation."

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The UK's £45bn rescue of RBS was one of the largest bank bailouts of the financial crisis. The state bought shares at between 410p and 500p, depending on calculation methods, with RBS closing on Monday at 339.3p.

The relatively slow return to the government's "in price" contrasts with the US experience of its bailout and subsequent sale of AIG, the insurer, for a profit of $23bn.

RBS declined to comment but, privately, senior executives at the bank pointed out that significant progress had been made in the restructuring plan launched by Mr Hester in 2009, which involves the rundown of non-core assets and paring back of its investment banking arm.

"We are confident we will achieve what we set out to achieve," one said after Mr Cameron's remarks.

The bank must now complete its restructuring and find a way to dispose of more than 300 bank branches, demanded under European state aid rules. Like other UK lenders it must also deal with the cost of compensating customers who were mis-sold PPI and interest rate hedging products.

One route to reprivatising RBS, which is 82 per cent-owned by the taxpayer, would be giving the public "free" shares in a privatisation of the state-controlled bank.

While the Treasury rubbished the prospect of such a move when first mooted by the Lib Dems in 2011, George Osborne's team did not dismiss it out of hand this month when the idea was revived by Vince Cable, the business secretary.

It is understood that Treasury officials are considering the idea along with other options for the stake's eventual disposal, such as a sale to the market.

However the suggestion that shares could be offered to voters as a pre-election bribe would incur the displeasure of the National Audit Office, to whom ministers must justify the disposal strategy.

The chancellor himself has played down reports in the past few days that he is considering a giveaway to the taxpayer.

"We've got to get the Royal Bank of Scotland to a point where it is worth what the taxpayer paid," the chancellor told Sky News at a G20 meeting in Moscow. "Then we can have a big national discussion about what to do with the shares and how to return it to the private sector."

Sajid Javid, Treasury minister responsible for RBS, told the Financial Times on Saturday that the idea had been put forward by the Liberal Democrats. Asked whether he was attracted to the idea in principle, he said: "No."

"Our focus remains on selling the shares at the best price at the right time."

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