RBS may require £4.5bn of extra capital
Yesterday was a news heavy day in a heavy news week. Whilst the political media is concentrating on the ongoing hacking fallout, the financial media is focussed on the Eurozone. All of this means some potentially significant UK politico-economic news risks being buried.
Royal Bank of Scotland Group plc needs to find an extra £4.5bn in capital reserves say analysts at Morgan Stanley
The crucial factor, and what transforms a financial story into a potentially political one, is that I can’t envisage much private sector appetitive for providing this capital – especially given the coming ICB report (which is likely, even if weak, to reduce future profitability at UK banks).
So if RBS requires more capital it’ll probably have to come from the largest existing shareholder – i.e. the UK government.
Whilst this capital is required, and a failure of RBS would be catastrophic for the UK economy, I bet George Osborne isn’t relishing the headlines that advancing another £4.5 billion to the bank will generate at a time of public sector cuts.