UK government stakes in bailed out banks cost £3.2bn, research reveals

3 June 2010

The costs of administering its stakes in the Royal Bank of Scotland and the Lloyds Banking Group are adding up to £3.2 billion for the UK government, a new report has revealed.

According to a study by JPMorgan, quoted by FT Alphaville, the authorities may decide to retain the stock on a longer than temporary basis.

If this takes place, researchers behind the study predicted that the debt would be included within the UK’s net debt, which would lead to the UK’s debt to GDP ratio increasing from 64 to 165 per cent.

Carla Antunes da Silva, an analyst at JPMorgan, said: “At the crux of this debate is the conflict of interest of owning large stakes in the banks whilst trying to implement significant regulatory changes in a global forum and balancing this with influencing banks' lending behaviour.”

The report also showed that the UK’s new coalition government is divided on what should be done with the two stakes.

Liberal Democrats are thought to want to retain the shares while Conservative members of the new authority are keener to see the stock sold.

The government owns a 41 per cent stake in Lloyds and an 82 per cent share in the Royal Bank of Scotland.

By Jim Ottewill

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development