UK government unlikely to sell bank stakes soon, news report claims

5 October 2010

The UK government may not sell its shares in Lloyds and the Royal Bank of Scotland (RBS) until the Independent Banking Commission publishes recommendations on how to prevent a future banking crisis, a news report has claimed.

According to the Independent, the state is likely to maintain its shares in the financial institutions due to uncertainty over the future form of the banking industry.

UK Financial Investments (UKFI) is thought to have almost vetoed the idea of a sale until the commission completes the report in September 2011 because of these concerns.

The body is responsible for the management of the government’s stakes in Lloyds, RBS, Northern Rock and Bradford & Bingley.

Ian Gordon, a banking analyst at Exane BNP Paribas, told the newspaper: “A sale is not impossible but it is highly unlikely.

“In any sale document the commission would have to be disclosed as a material and uncertain risk factor. Both in terms of this and in terms of value maximisation, it makes sense to wait.”

The UK government currently holds a 41 per cent share in Lloyds and an 84 per cent stake in RBS.

John Vicker, chairman of the banking commission, will lead the team in its investigation on how to make the banking system more stable.

By Jim Ottewill

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