A report has suggested that the government might sell of part of its holding in RBS and Lloyds in the next year.
Speculation is mounting that the government is readying itself to sell stakes in private banks it purchased in last year's emergency bailout plans.
UK Financial Investments (UKFI) is thought to be sounding out foreign buyers at the moment, the Financial Times reports. The part-nationalisation scheme, which involved £37 billion of public money being used to buy equity stakes in RBS, Lloyds TSB and HBOS, was launched during the worst of the credit crunch in October 2008.
The report is likely to spark fears among analysts that the government could take a major financial hit on the sales - if they are to go ahead in the near future. This is because bank stock prices remain depressed, despite the recent market rally - meaning that UKFI might not get good value for money on the deal.
An insider on the negotiations told the newspaper they were upbeat on whether or not interest from the private sector would be forthcoming. "A lot of people around the world think once you get through the losses the earnings power of these banks will be formidable," they said.
Sources added that the sales would not all come at once - or encompass the entirety of the government stakes - but could instead be in "quite large dribs and drabs". They could potentially be made within a year.
Liberal Democrat shadow chancellor Vince Cable strongly criticised the move in a statement released late yesterday. "If there is any truth in this speculation, then it is seriously worrying," he said.
"Any sale of the state owned banks while the market remains so depressed would be disastrous for the taxpayer. As the banking crisis rumbles on there is no hope of getting anything close to a good price."
Currently, the taxpayer owns 43.5 percent of the Lloyds Banking Group - created via the merger of Lloyds and HBOS in January 2009 - and 70 percent in RBS.
