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You can find the current article at its original source at https://www.theguardian.com/commentisfree/2016/dec/11/taxpayers-saved-royal-bank-of-scotland-time-we-owned-it-rbs
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| Taxpayers saved the Royal Bank of Scotland. Now it’s time we owned it | |
| (35 minutes later) | |
| Every month there are new headlines about the Royal Bank of Scotland’s wrongdoing. The chief executive, Ross McEwan, puts the best spin on things, but his bank is still failing; most recently it failed the Bank of England’s stress test. Trying to privatise the bank hasn’t worked and state ownership hasn’t been a rip-roaring success either; but worse, its very size and dominance means together with the other big banks it is stifling competition. Now is the right moment for a different approach. | Every month there are new headlines about the Royal Bank of Scotland’s wrongdoing. The chief executive, Ross McEwan, puts the best spin on things, but his bank is still failing; most recently it failed the Bank of England’s stress test. Trying to privatise the bank hasn’t worked and state ownership hasn’t been a rip-roaring success either; but worse, its very size and dominance means together with the other big banks it is stifling competition. Now is the right moment for a different approach. |
| Together as taxpayers we saved the Royal Bank of Scotland – now we should each be allowed to own it. It should become a people’s bank, which every tax-paying British citizen would have the right to become a part-owner of. | Together as taxpayers we saved the Royal Bank of Scotland – now we should each be allowed to own it. It should become a people’s bank, which every tax-paying British citizen would have the right to become a part-owner of. |
| The Royal Building Society of Scotland, with an iron lock on its assets, would be a final, decisive break with the Fred Goodwin era. It would conserve the strength and credibility of one of our major financial global players while injecting a much needed dose of competition and diversity into British banking. | The Royal Building Society of Scotland, with an iron lock on its assets, would be a final, decisive break with the Fred Goodwin era. It would conserve the strength and credibility of one of our major financial global players while injecting a much needed dose of competition and diversity into British banking. |
| More than £45bn of taxpayer funds have been injected into the Royal Bank of Scotland. This was the right thing to do, but neither keeping it as a state bank nor a fully privatised bank offer the same advantages as turning it into a mutual. Its sheer size means it risks being captured again by narrow shareholder interests or those of its senior executives, or both. | More than £45bn of taxpayer funds have been injected into the Royal Bank of Scotland. This was the right thing to do, but neither keeping it as a state bank nor a fully privatised bank offer the same advantages as turning it into a mutual. Its sheer size means it risks being captured again by narrow shareholder interests or those of its senior executives, or both. |
| Turning it into a mutual with its assets protected from the so-called carpet-baggers who championed building society demutualisation in the 1990s would substantively change the culture at RBS and, crucially, make banking more competitive. In strong mutuals it is member expectations rather than shareholder interests that help to ensure more competitive products and services are prioritised by managers. | Turning it into a mutual with its assets protected from the so-called carpet-baggers who championed building society demutualisation in the 1990s would substantively change the culture at RBS and, crucially, make banking more competitive. In strong mutuals it is member expectations rather than shareholder interests that help to ensure more competitive products and services are prioritised by managers. |
| Despite new entrants to the banking market and the many reforms to regulation, the structural problem in Britain’s banking market – a lack of competition – is as bad now as it was at the time of the financial crash, and is arguably worse following the banking mergers that the crash precipitated. | Despite new entrants to the banking market and the many reforms to regulation, the structural problem in Britain’s banking market – a lack of competition – is as bad now as it was at the time of the financial crash, and is arguably worse following the banking mergers that the crash precipitated. |
| In strong mutuals it is member expectations rather than shareholder interests that ensure more competitive products | In strong mutuals it is member expectations rather than shareholder interests that ensure more competitive products |
| Anyone tempted to think that banking is now a wholly reformed and properly functioning market would find the Competition and Markets Authority investigation into retail banking, published in August, disturbing reading. | Anyone tempted to think that banking is now a wholly reformed and properly functioning market would find the Competition and Markets Authority investigation into retail banking, published in August, disturbing reading. |
| The CMA described the personal banking market as being concentrated, that concentration levels have increased since the crisis, and that competition is not working well. | The CMA described the personal banking market as being concentrated, that concentration levels have increased since the crisis, and that competition is not working well. |
| It went on to note that for lending to small and medium-sized businesses, the four largest providers, RBS, Lloyds, Barclays and HSBC, together had a combined market share of over 80%. They underlined the adverse effects on competition in personal banking, basic current accounts and SME lending caused by the combination of persistent concentration in the market and barriers to entry and expansion. | It went on to note that for lending to small and medium-sized businesses, the four largest providers, RBS, Lloyds, Barclays and HSBC, together had a combined market share of over 80%. They underlined the adverse effects on competition in personal banking, basic current accounts and SME lending caused by the combination of persistent concentration in the market and barriers to entry and expansion. |
| Full private ownership of all the big banks, the stated aim of both the last two governments, is only likely to exacerbate the lack of competition. | Full private ownership of all the big banks, the stated aim of both the last two governments, is only likely to exacerbate the lack of competition. |
| In 2014, of the top 10 banking groups by market share for personal current accounts, only two could reasonably be described as mutual, and only one had a market share of 5% or higher. | In 2014, of the top 10 banking groups by market share for personal current accounts, only two could reasonably be described as mutual, and only one had a market share of 5% or higher. |
| State ownership of RBS has steadied a sinking ship, but it has not changed the critical weakness in British banking: the lack of competition between different types of banks or building societies. | State ownership of RBS has steadied a sinking ship, but it has not changed the critical weakness in British banking: the lack of competition between different types of banks or building societies. |
| Across Europe, the United States and Australia, mutual banks play a critical role in challenging traditional shareholder-owned banks in financial services markets. Rabobank is a Dutch co-op bank – one of the world’s top 30 banks. Navy Federal is a $50bn mutual bank serving the American military and Crédit Mutuel is one of the biggest French banks. | Across Europe, the United States and Australia, mutual banks play a critical role in challenging traditional shareholder-owned banks in financial services markets. Rabobank is a Dutch co-op bank – one of the world’s top 30 banks. Navy Federal is a $50bn mutual bank serving the American military and Crédit Mutuel is one of the biggest French banks. |
| Indeed, part of the reason for the lack of competition in British banking is that many of the biggest building societies in the 1990s demutualised and were gradually bought up by the big banking groups. | Indeed, part of the reason for the lack of competition in British banking is that many of the biggest building societies in the 1990s demutualised and were gradually bought up by the big banking groups. |
| The suspension of the sale and reprivatisation of shares in RBS offers a new opportunity to put in place an alternative to either state or private ownership. No one thinks the government will get its money back from the sale of RBS shares in full for the foreseeable future. Indeed, the small number of RBS shares that were sold resulted in a net loss of £1bn to the taxpayer. | The suspension of the sale and reprivatisation of shares in RBS offers a new opportunity to put in place an alternative to either state or private ownership. No one thinks the government will get its money back from the sale of RBS shares in full for the foreseeable future. Indeed, the small number of RBS shares that were sold resulted in a net loss of £1bn to the taxpayer. |
| It’s time to return RBS to the people who saved it, and create a competitor to the traditional shareholder-led bank. Indeed, it is the only sustainable way to inject a serious dose of competition into arguably Britain’s most important industry. | It’s time to return RBS to the people who saved it, and create a competitor to the traditional shareholder-led bank. Indeed, it is the only sustainable way to inject a serious dose of competition into arguably Britain’s most important industry. |