Royal Bank of Scotland has confirmed that the Government is now the bank’s biggest shareholder, after a £20bn bail-out by the Government. The bank will own almost 57.9% of the Edinburgh-based bank which, until the credit crunch struck last year, was the UK’s second biggest.
The injection of capital follows a failed attempt to raise £15bn from investors. Only a handful took up an offer to subscribe to new shares at 65.5p because the banks share price had been trading below that level.
The Government is also buying £5bn of preference shares which must be paid off before ordinary shareholders can receive dividends again. As a result of the Government’s majority share, the bank will lose freedom in areas such as executive pay and dividend policy.
RBS also had to agree to return to “normal” lending practices, and says it will guarantee overdraft rates and contracts for its business customers for at least a year.
The Government’s shares will be held by UK Financial Investments, the company created to oversee the Government’s investment in UK banks, to maximise value for taxpayers and prevent politicians making business decisions.
Its chair will be Philip Hampton, chairman of Sainsbury’s and former finance director of Lloyds TSB.
Two weeks ago, Royal Bank of Scotland said it would axe 3,000 staff. The cuts to its global banking and markets workforce will take place across 50 countries, including the UK.
The job losses are due to occur over the coming weeks. It is expected that the bank’s London base will be one of the hardest hit. RBS has 170,000 staff worldwide, of which approximately 100,000 are in the UK.