The chances of taxpayers recovering the £45 billion rescue package from the Royal Bank of Scotland have been dealt a blow after share prices fell following the shock announcement of Stephen Hester's departure.
Mr Hester will leave the bank this year after a whirlwind five-year tenure as chief executive.
He is highly regarded in the City after diligent work to stabilise a crisis-ridden institution, relieving its bloated balance sheet of assets worth a colossal £900 billion.
The announcement of his departure saw shares in the RBS Group fall by up to 8% at one stage yesterday.
Any sustained fall in share price value would have severe consequences for the government, which holds an 81% stake in the bank following a £45 billion bailout at the height of the financial crisis.
Just days ago, Mr Hester appeared confident that taxpayers would be fully reimbursed when the bank is re-privatised.
"We are now in a position where the Government can begin to prepare for privatising RBS,” he said.
“While leading that process would be the end of an incredible chapter for me, ideally for the company it should be led by someone at the beginning of their journey.”
RBS share prices fell on the announcement of chief executive Stephen Hester's departure.
Good / Bad Split
There have been calls from the Parliamentary Commission on Banking Standards to split the institution into ‘good’ and ‘bad’ banks.
The premise behind the move is that the bank would become liberated if it were no longer weighed down by its toxic assets.
The Commission’s finalised report, which was completed this week, stopped short of insisting that this was done, but recommended that the Treasury looked further into the practicalities of such a split.
But the cabinet is thought to be opposed to a split, believing that it would delay privatisation and have negative consequences for its 81% stake.
Mr Hester’s departure, together with a new insistence on business lending, has prompted claims that relations between himself and the Government were strained, with fund managers suggesting that the Chancellor is now effectively controlling the bank from Whitehall.
Keith McDonald
Which4U Editor
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