Getting your share of the banks: giving the banks back to the People

Getting your share of the banks: giving the banks back to the People
Document type
Article
Author(s)
Williams, Stephen
Publisher
CentreForum
Date of publication
1 March 2011
Subject(s)
Trends: economic, social and technology trends affecting business
Collection
Business and management
Material type
Reports

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As a result of the 2008 financial crisis, Royal Bank of Scotland (RBS) and Lloyds Banking Group (Lloyds) were rescued by a British taxpayer-funded recapitalisation, leaving the British government as the reluctant owner of 84 per cent of RBS and 43 per cent of Lloyds. Government should not be in the business of running banks. As the banks return to profitability, it is time to consider option for returning them to the private sector.

The bailout’s extraordinary circumstances provide the government with an opportunity to implement a radical alternative to a conventional bank privatisation. Any privatisation must meet the twin goals of recouping the taxpayers’ investment in full, and equitably sharing the opportunity to benefit from RBS’ and Lloyds’ future profits and growth in value.

It is proposed that the government-owned bank shares are distributed to the British public, with no cash required of them up front. In order for the government to recoup the public’s investment that rescued the banks, Portman Capital has developed a model that guarantees a fixed minimum price – known as the ‘floor price’ – for HM Treasury when
individuals sell their shares, so citizens will benefit when the share price increases above the floor price.

This proposal is designed to maximise the likelihood of recouping the entirety of the government’s 2008 investment in RBS and Lloyds. It would be considerably cheaper than a conventional privatisation, and it would

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