| GEO Business|
| UK Govt considers plan to reduce bank holdings|
| Updated at: 2044 PST, Tuesday, July 14, 2009|
LONDON: The British Government could start to sell part of its stakes in state-owned banks within months, but it will retain the majority of its investment for several years, it emerged yesterday.
Glen Moreno, the acting chairman of UK Financial Investments (UKFI), the body set up to manage the Government’s stakes in banks, said yesterday: “I would not be at all surprised to see some transactions occurring within a year or so . . . and continuing over the next several years.”
Mr Moreno’s comments contrasted sharply with the views of John Kingman, UKFI’s chief executive and a former Treasury mandarin. Mr Kingman, launching UKFI’s strategy document, urged caution, saying that the Government would hold the stakes in banks for “several years”.
“This cannot be a short-term game,” he said, adding that there had been “absolutely no pressure from the Government” to begin a sales process early.
UKFI is likely to sell down its stakes one at a time. The methods under consideration include public share offerings, exchangeable bonds and private placements.
Gordon Brown is under intense pressure to show that the Government’s investment in Royal Bank of Scotland and Lloyds will produce a profit for taxpayers when they are sold. The Government saved RBS from collapse and shored up Lloyds and HBOS with a £37 billion bailout last October.
UKFI, which was set up by the Treasury last November, is in charge of the 70 per cent stake that the Government currently owns in RBS and is responsible for its 43 per cent holding in Lloyds Banking Group, formed by the merger of Lloyds and HBOS.
Northern Rock and Bradford & Bingley’s mortgage books are due to be transferred to UKFI this year.
UKFI’s loss on its stakes in RBS and Lloyds was £10.9 billion at June 30.
Under the terms of the scheme, the Government will also inject more money into RBS, which will take its total investment in RBS and Lloyds to about £60 billion.