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Gov't may be forced to bail out RBS again
by Michelle McGagh on Oct 07, 2011 at 07:40
The government may be forced to bail out Royal Bank of Scotland for a second time after pressure from the European regulator for banks to strengthen their balance sheets.
According to the Financial Times, there are fears that RBS may have to go to the government to boost its capital. The European Banking Authority has announced it is to retest 91 banks on a stricter criteria, including applying write-downs to sovereign debt holdings.
In previous stress tests RBS had capital of above the minimum but below 7% and, according to the paper, would be hit hard by any sovereign debt haircuts.
RBS received the UK’s biggest bailout in the 2008 crisis, with the taxpayer pumping £45 billion into the company.
A government source told the FT: ‘[RBS’s} sovereign exposure is not fundamentally worrying but if there is a broader European drive to recapitalise the banks it’s conceivable they may need more government money.’
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7 comments so far. Why not have your say?
GM
Oct 07, 2011 at 08:08
So what is the difference between a bailout and strengthening the balance sheet. I thought the former was the bank had run out or money and the latter was theoretically required money to make the bank stronger. The former needs real cash and the latter just a promise to assist should the need arise.
Or am I missing something?
I hardly feel the EBA has done any service to the European banking industry by coming out with this now. Perhaps if it had objected properly to the weaker countries joining the Euro in the first place might have been a better strategy.
report thisKey bored vigilante (just kidding)
Oct 07, 2011 at 08:19
...how about the last tranche of bonuses is paid back... SORTED!!!
report thisNick
Oct 07, 2011 at 08:27
RBS need to sort themselves out. Why should taxpayers keep rescuing them? Also where is the Scottish government in this, its their bank, not ours!
report thisMan of Kent
Oct 07, 2011 at 09:38
"The European Banking Authority has announced it is to retest 91 banks on a stricter criteria, including applying write-downs to sovereign debt holdings."
Then what? If it discovers some of them are technically insolvent or prone to insolvency if A, B or C happens? Will this hasten a downgading of their credit rating and force them prematurely out of business or distort their value so they can be hoovered up by a larger bank at a knockdown price? All because somebody wants to look as though they are being a tough regulator after the event?
@Nick - if we do prop RBS up again we might get our money back; if we don't we might lose the lot. Unfortunately, painful as it might seem, we need to see this one through.
report thisS-ville
Oct 07, 2011 at 10:13
Go the whole hog and officially nationalise it, and use it as a national investment bank to support and encourage British business.
Ok, it's not that simple, but if you're going to pour good money after bad into what appears to be a bottomless pit, you may at least look to get something in return.
report thism.marsden
Oct 07, 2011 at 12:15
Nick, RBS also inlcudes the former English NatWest. Also, the Scottish Executive has no legislation to allow them to bail out the bank. All revenue goes to the Treasury.
report thisl'ifa passeport en provenance de France
Oct 07, 2011 at 16:47
Fractional-reserve banking eh? and nobody knows who owns what bit of paper!
now how do we sort this lot out?....answers on a poscard please
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