Cabinet minsters have entered into discussions over the proposal for the government to buy the remaining 18% of Royal Bank of Scotland (RBS) and nationalise the bank. A nationalised RBS could be used as a vehicle to promote lending to small businesses and stimulate growth in the UK economy. We believe the idea clearly has merit as the large UK banks have consistently failed to lend money to small businesses. RBS is suffering from reputational issues following its government bailouts and a nationalisation of the bank could offer it new direction and increase its competitiveness in the UK marketplace.
George Osborne is opposed to the project as it will cost approximately £5 billion to buy out the private investors holding RBS shares.