Bank-shares giveaway is a clever idea (The Evening Standard)

In May 2011, The Centre for Policy Studies published James Conway, Toby Fenwick and Michael O’Conner’s report, ‘Give Us Our Fair Shares’, which takes the view that the Government should distribute their stakes in Lloyds and RBS to the taxpayer rather than sell them. Anthony Hilton’s support was featured in the Evening Standard on Thursday 7th February 2013.

To view the full article, please visit the Evening Standard website

“At the end of a thoughtful speech on the future of banking, given in the City yesterday, Business Secretary Vince Cable delivered the throwaway line that, rather than trying to sell its stakes in Royal Bank of Scotland and Lloyds on the stock market, perhaps Government should consider instead simply giving the shares directly to the public.

This is anything but a daft idea. Portman Capital, a London financial boutique, has been looking at this issue for several years, and worked up a coherent plan about how it could be done. Far from being barking, it might get the Government off a rather large hook.

Thus far, to the extent Government has talked about it at all, it has implied that when the good times return, it will sell its banking stakes on the stock market in the same way that Mrs Thatcher privatised British Telecom, British Gas and all the others back in the Eighties. What this glosses over is that the share stakes are just too big to sell in one lump if you want to get a fair price. Government might therefore sell in tranches, but that could take years — it was 20 years in the case of Swedish bank Nordea, which got into an equivalent mess in 1992.

Such protracted ownership is surely undesirable because Government as shareholder will inevitably interfere, and not always constructively. But a complete sale would also be fraught with difficulties because the City would claim it could not afford the billions RBS and Lloyds would cost and that the only way it could take on that amount of risk and come up with that amount of cash would be if it were certain to get a bargain; in other words, it would screw the Government on price.”

To view the full article, please visit the Evening Standard website

The report, ‘Give Us Our Fair Shares’, by James Conway, Toby Fenwick and Michael O’Conner can be found here

Date Added: Friday 8th February 2013