Rough Ride For RBS Lloyds – US-FOREX.US
Britain’s Royal Bank of Scotland and Lloyds Banking Group have buckled to the muscle of Brussels, submitting proposals to restructure their businesses. But whether it will be enough to satisfy the stringent requirements of the European Commission remains to be seen. Outlining the commission’s latest guidelines on conditions that must be met by banks receiving state aid for more than six months, Philip Lowe, director of the Commission’s competition department, said that two “very big” British banks had submitted their proposals for restructuring in the past two months.
RBS
, which is 70% owned by the British state, has already outlined plans to sell off 240 billion pounds of non-core assets including in Asia and Europe as it attempts to refocus its operations on the U.K. Lloyds Banking Group
, 43% controlled by the government, has already announced that it would be winding down its Cheltenham & Gloucester thrift subsidiary. However, recent speculation has pointed to Lloyds’ need to sell part of its massive branch network and a lucrative asset management division in order to allay concerns about having uncompetitive advantages through the state aid.The European Commission has given the go ahead to nearly 70 instances of state aid in the current financial crisis. However, its latest guidelines are a clear signal that this aid will come at a price. The aided banks will have to conduct a stress test to prove they are viable businesses without the aid, bear “a fair burden” of restructuring costs and take measures to “limit distortions of competition in the single market.” The requirements may even require “absorption by a viable competitor or orderly winding up,” say the guidelines. U.K. Financial Investments, representing the government’s states in the banking sector, said earlier this month it had suffered paper losses of nearly 18 billion from its investments in RBS and Lloyds, but that it was aiming to get the money back with profit.
As government authorities have been attempting to chart new regulatory territory for a post-credit-crunch world, banks have begun expressing their anxiety that the environment could prove stifling. The latest warning came on Thursday as the Institute of International Finance chaired by Deutsche Bank chief executive Josef Ackermann warned that some measures verged on financial protectionism.