Enough is enough when it comes to RBS, government says

The government has been losing patience with partially-taxpayer funded Royal Bank of Scotland, making noises that they may fully nationalise the bank in order to force RBS to actually extend mortgages and personal and business loans to jump-start the economy.

The ink is still wet on the Funding for Lending scheme, but ministers are already wracking their brains for new ways to disburse working capital to businesses or home loans to those who need it. One option that has been bandied about has been to spend around £5 billion to buy out the last 18 per cent of RBS that isn’t taxpayer-owned at this point in order to seize complete control.

This isn’t just a grab for centralised power on the part of the government but one of the ‘last resort’ steps for a bank that has been reporting losses for four years straight. RBS was bailed out to the tune of £45 billion four years ago and has been bleeding funding ever since, even as its status of one of the Big Four current account providers in the UK remains unchanged.

The bank has even more bad news, as half-year losses are expected to be announced soon. As if that wasn’t bad enough, the Financial Services Authority is looking into how much of a role RBS played in the recent Libor scandal, with the expectation that a hefty fine is on its way.

It says a lot about the urgency the government is feeling that they’re willing to take on such a mess of a bank, investing not only another £5 billion in taxpayer cash into what could be a sinking ship but also taking on all the liabilities that RBS has been operating with since the credit crunch. With the economy nosediving, extending credit to stimulate business growth is a higher priority it seems –  a decision that makes sense, provided the plan actually works.

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