The International Monetary Fund (IMF) called on the British government on Wednesday to adopt a clear plan for selling its stakes in the Royal Bank of Scotland (RBS) and Lloyds Banking Group (LBG), which it supported during the crisis.
-A clear strategy is needed for the two banks in which the government intervened to return them to private sector ownership- states the IMF in a statement released at the end of its regular visit to London.
The British government came to the aid of RBS and LBG at the height of the financial crisis in 2008, when the crisis in the U.S. subprime mortgage market caused a credit shortage and ravaged banking sectors worldwide.
The IMF now wants British Finance Minister George Osborne to sell the 81% state stake in RBS and the 39% stake in Lloyds.
They praised the restructuring process initiated at both lenders, during which tens of thousands of workers were laid off and large parts of the business were sold.
However, the IMF warns of remaining challenges, particularly after last month’s failed negotiations by Lloyds to sell 632 branches to rival The Cooperative Group due to unfavorable economic conditions.
-Banks have made progress in cleaning up their assets and improving profitability. However, they still face certain challenges, as evidenced by the recent failure to sell non-core businesses and the still low market-to-book value ratio in the case of RBS- it adds.
The IMF warns that the government may still need to assist in the recapitalization of banks before they are re-privatized.
-When determining the strategy for returning banks to private ownership, care must be taken to maximize value for taxpayers, strengthen confidence and competition in the sector, and minimize spillover effects on other sectors- emphasizes the IMF.
-In this context, the state should assist if such a need arises during recapitalization- they add.
