Should UK adults be given shares in bailed-out banks?
- 7 March 2011
The Guardian reports that a group of former bankers and hedge fund financiers have come up with a plan which would involve government-owned shares in Royal Bank of Scotland (which owns Nat West) and Lloyds Banking Group (which owns Lloyds TSB and Halifax) be distributed to the public, as an alternative to a conventional bank privatisation.
The newspapers reports that the proposal has won the backing of the Liberal Democrat backbench Treasury committee and that Stephen Williams, MP for Bristol West and co-chairman of the committee, will present the plan to the committee.
RBS and Lloyds are 84% and 43%, respectively, owned by the government.
The government is expected to sell its stakes as early as next year. The new proposal is billed as an alternative way of rewarding taxpayers for the £66bn in government money that was ploughed into the banks.
The plan's backer is Portman Capital Partners, which was set up in 2009 by five former City professionals.
The paper has been seen by the Guardian, entitled, "Getting your share of the banks: giving the banks back to the people".
It proposes that state-owned bank shares should be handed out, for free, to all 45 million British adults on the electoral register, with each person receiving about 1,450 shares in RBS and 440 in Lloyds.
Portman has developed a model that guarantees a fixed minimum price, known as the "floor price", allowing people to pocket the difference when the share price rises above this.
So, for example, the floor price could be fixed at the level at which the shares were bought by the government – 51p per share for RBS and 74p for Lloyds. Then, if the share price rises to, for example, 75p for RBS and £1.10 for Lloyds – well below their historic highs – the profit would be more than £500 per person.
Automatic trading would be the default option for individuals, meaning that the shares could be sold on their behalf within two to three years, although people could opt out and trade the shares themselves.
Portman admits there is a risk that, if the shares do not rise, it could take a while for the government to get its money back.
Cortina1600E claims that the proposals add nothing new. "The nation already owns the banks, it's another example of ideological excess to re-issue ownership on a unitised basis. Must be some loot in it for some blood sucker. It also opens the floodgates for further abuse of banking privileges."
"What the business and finance sector fear most of all is a Government of the people going into business against their direct profit interests"
speedfriend retorts: "Cortina1600E. What we don't need are state banks like in Germany and Spain, which are all the ones that have gone bankrupt because they had no profit motive. I fail to see why the oligopoly is so hated, unlike most countries we have free banking (unless you don't stick to terms) and in the five years leading up to the crisis, lenders were massively under charged for the cost of their loans."
Optymystic points out that similar share ownership schemes have been carried out in the past. "I had that Roman Abramovitch round my house, trying to buy my shares for couple of Reindeer and a photo of Ashley Cole.
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