Break up RBS into 130 local banks, urges think tank
A report from the New Economics Foundation says each would bank would have assets of up to £2 billion and be better able to serve local economies.
The foundation argues that this would be a better alternative to privatisation of the whole bank and deliver more value for taxpayers.
The report reveals the benefits of restructuring RBS on a public trust model of ownership, similar to John Lewis in the UK and the German Sparkassen.
“Nationally, the resulting boost to GDP would far outstrip the estimated £700 million annual savings in interest payments that would result from using the estimated £40 billion proceeds from privatisation to repay the national debt,” say the report’s authors.
RBS received £45.5 billion in public funds when it was bailed out in 2008, and the government retains an 81% stake.
Chancellor of the Exchequer George Osborne reaffirmed the government’s intention to return RBS to the private sector in his Mansion House speech in 2013.
Tony Greenham, Head of Finance & Business at the New Economics Foundation, said: “We need a proper debate on the best way to maximise its benefit to the economy and get the best deal for taxpayers. It’s time for a full, independent review of the options for the future of RBS.
“A network of local banks – one for every city and county, and fully accountable to citizens – would not only boost the diversity and resilience of the UK banking system, it would spur investment in regions outside London, increase lending to small businesses, and protect jobs and customer service by reversing the damaging trend of branch closures.
“Regardless of the bank’s performance, a hasty sell-off is not in the public interest. Trust in UK banking institutions was eroded by the financial crisis of 2008, but learning the lessons and establishing RBS as a bank which genuinely serves local needs would help to rebuild confidence in the UK banking system as a whole.”