The UK government has commenced the sale of its shares in majority state-owned retail bank, the Royal Bank of Scotland (RBS), which was bailed out by the government during the financial crisis in 2008.
HM Treasury and the Chancellor of the Exchequer George Osborne revealed on Tuesday that 5.4% of the government’s stake in RBS has been sold at £3.30 per share, raising £2.1bn that will be used to pay down the national debt.
RBS shares were purchased by the UK government for £45bn in 2008 and 2009. The bank was also supplied with cheap funds.
UK Financial Investments advised the Chancellor on Monday that it would be appropriate to begin the first sale of the government’s shareholding in RBS. Osborne agreed to the share sale, marking the first step in returning RBS to the private sector.
Osborne said: “This is an important first step in returning the bank to private ownership, which is the right thing to do for the taxpayer and for British businesses: it will promote financial stability, lead to a more competitive banking sector, and support the interests of the wider economy.”
CEO of RBS Ross McEwan also stated: “I’m pleased the government has started to sell down its stake. It’s an important moment and reflects the progress we are making to become a stronger, simpler and fairer bank. There is more work to be done but we’re determined to build a bank the country can be proud of.”
According to RBS, its capital position has improved dramatically since 2008. Its loan:deposit ratio is much more sustainable than it was during the crisis and is now at 92% , compared to 154%. The bank’s share price has also appreciated by 330% since its lowest point in January 2009.
However, the share sale is below the price paid by the government and represents a loss to the UK taxpayer of about £1.07bn.