One of the main features of the credit crunch in the UK were the collapse of Royal Bank of Scotland and the UK taxpayer bailout of it. Since then we have been regularly informed that it has recovered and that the sunlit uplands are not only in sight but have arrived. The 27th of January this year was an example of this.
“I am determined to put the issues of the past behind us and make sure RBS is a stronger, safer bank,” chief executive Ross McEwan said.
“We will now continue to move further and faster in 2016 to clean up the bank and improve our core businesses.”
I am not sure how you can move “further and faster” on something you have supposedly fixed several times before! If we look back to September 2014 we were told something which is likely to echo later in this article.
we expect to spend much of the next 18 months simply marvelling at the sheet size of the RBS’ capital surplus and wondering why it is just sitting there gathering dust,’ he said.
Back in 2012 my old employer Union Bank of Scotland was on the case sort of.
However, with 2013 expected to be the last year of significant restructuring for RBS, it is likely to be one of the first European banks to have dealt with legacy issues
The International Financing Review put its oar in as well.
In some ways, however, RBS is well ahead of the pack…….RBS was forced to concentrate on what it was good at and should come out of its current (second) restructuring as one of the more efficient banks in the industry.
Mind you at least someone had a sense of humour on the way.
If we advance to the figures released in January of 2014 we see that BlueBullet on Twitter had a wry take on events.
Dear Dragons Den, I have 80% share. Losses this year are £8 billion. I am paying out £0.5 billion in bonuses. Would you like to invest?
Royal Bank of Scotland Today
Which pack was RBS “well ahead of” here?
The Royal Bank of Scotland Group (RBS) did not meet its common equity Tier 1 (CET1) capital or Tier 1 leverage hurdle rates before additional Tier 1 (AT1) conversion in this scenario. After AT1 conversion, it did not meet its CET1 systemic reference point or Tier 1 leverage ratio hurdle rate.
The rhetoric carries on as Mark Carney is telling us “they (RBS) have made progress” in this morning’s press conference. Although there is a clear warning signal as he deflects a question about it to a colleague. This happens on difficult questions and means that the Governor cannot be quoted in future on the details for RBS.
Reuters sums up the tale of woe for RBS here.
The unexpected result underlines the litany of problems RBS is grappling with, which include a mounting legal bill for misconduct ahead of the 2008 financial crisis and difficulties selling off assets such as its Williams & Glyn banking business.
So “litany of problems” is the new “stronger,safer bank”? So what will it do about this?
The state-backed lender rushed out a statement following the announcement to say it would take a range of actions, including selling off bad loans and cutting costs to make up the capital shortfall identified by the tests of around 2 billion pounds ($2.49 billion).
“Rushed out a statement” is really rather poor when it will have been given advance notice about this but this does echo its response to the 2008 crisis. Meanwhile I guess it cannot go back to the UK taxpayer for more cash as of course it did this only in March.
Royal Bank of Scotland is paying £1.2bn to the Treasury to buy out a crucial part of its £45bn bailout in a step towards returning the bank to the private sector.
This was a way that Chancellor George Osborne massaged and manipulated the UK public finances back then. Was this from Earth Wind & Fire the backing track?
Every man has a place
In his heart there’s a space
And the world can’t erase his fantasies
Take a ride in the sky
On our ship, fantasize
All your dreams will come true right away
I do hope that he will be called in front of the Treasury Select Committee to explain this and that his diary is not too full as he collects new titles. As I suspect we can file this in the bin.
George Osborne has already said he is hoping to generate £25bn from the sale of three-quarters of its RBS shares in this parliament,
The share price is down nearly 3% at 191.5 pence as I type this and perhaps it should be another 3%. The breakeven for the UK taxpayer is just over £5.
Other UK banks
There were more technical and minor failures to be seen.
Barclays did not meet its CET1 systemic reference point before AT1 conversion in this scenario. In light of the steps that Barclays had already announced to strengthen its capital position, the PRA Board did not require Barclays to submit a revised capital plan…..Standard Chartered…. did not meet its Tier 1 minimum capital requirement (including Pillar 2A). In light of the steps that Standard Chartered is already taking to strengthen its capital position, including the AT1 it has issued during 2016, the PRA Board did not require Standard Chartered to submit a revised capital plan.
A confession from Mark Carney
We got yet another U-Turn as we were told that household debt is now an issue which I summarised on Twitter like this.
Mark Carney says “thanks” to a question about household debt which means of course the opposite!
The fact that the subject got a mention is extremely revealing. As nobody at the press conference had either the gumption or the courage to ask Governor Carney how his Bank Rate cut and extra QE would improve household debt we were left with a sinking feeling. Which of course is what Governor Carney had been telling us was happening to house hold debt. Also he has a pretty odd view about lending for cars and automobiles.
Does Mark Carney really think “auto lending” is secured debt as he just claimed? What about depreciation?
There used to be quite a few adverts on the radio for Buy To Let lending for cars which I always thought was bizarre. Either Governor Carney wants to boost this or he used his £250,000 a year rent allowance to have a punt. Oh excuse me, long-term investment.
We were also told that he has plenty of “tools” although when I enquired about a definition of them some were ones he may or may not agree with.
A bunch of them, they sit on the committee with me.
I have been warning about the rise of unsecured lending in the UK and my latest piece on the issue was only yesterday. Perhaps the Governor read it.
There are several issues to consider here. I think that the way Governor Carney has used it to highlight claimed concerns about the rise of household lending is revealing. It enabled him to get this on record with little chance of being challenged as the media rushes to print about RBS. I also note that he shuffled the question about Buy To Let lending to someone else.
Meanwhile RBS continues on its own private ( albeit publicly owned) Road To Nowhere. We have almost infinite inflation in false dawns but a reality of disappointment and failure. After 8 years of this is it time to file the claims of reform in the “Liars Lexicon” mentioned in the comments section yesterday.
Meanwhile we have an example of another of my themes in play. Actual helicopter money from the Indian Air Force.