Policy Exchange proposes plan to re-privatise Lloyds and RBS

10th Jun 2013 11:07

Think-tank Policy exchange on Monday unveiled a proposal by which the Treasury could eliminate its stakes in Royal Bank of Scotland (RBS) and Lloyds by the time of the next elections in what would amount, it claims, to the largest privatisation ever in the United Kingdom.Under their plan each adult British resident would receive between £1,100 and £1,650 worth of stock depending on the number of applicants, which they estimate at between 20 and 30m.They would only have to pay for those shares once the decision is made to sell them, while the Treasury would assume the risk of any fall in the share price as a 'price-floor' would apparently be set. If the stock failed to rise then it would return to the Treasury after a 10 year period, it goes on to explain. No mention is made of any redistribution effects.Policy exchange argues that by offering a large portion of its shareholding to taxpayers in this way the government would be able to move much if not all of the banks into private ownership in one go and at a better price than through a traditional sale.At the same time such a scheme would give the taxpayer the bulk of the upside and generate the conditions for a sizeable institutional and retail offering alongside the distribution, the think-tank says. The proposal comes on the heels of reports that the Chancellor will use his mansion House speech on June 19th to signal his desire to return both lenders to private hands before the 2015 general election. More specifically, according to the Financial Times the Treasury is considering selling a first 10% stake in Lloyds Banking Group before the end of the year principally through a placing with institutions, although a significant offering to retail investors, possibly at a discounted price, is also feasible.As of 11:04 shares of Lloyds are down by 0.1% to the 62.27p mark while those of RBS are rising by 2.0% to 333.8p. AB