6 Life Lessons We Learned From Royal Bank of Scotland

RBS Sale Explained; Why is the government selling Royal Bank of Scotland?

 

1) It’s called risk for a reason, stupid.

Bankers like risk.

Financial Crisis in a Nutshell: The US market had lent BIG amounts of dollar to people in risky subprime mortgages (given to people with bad credit ratings). Basically, they shouldn’t have risked so much.

People: We can’t pay back what we owe.

Banker: Oh F*^&!

 

2) You really should save money for a rainy day.

When people started defaulting (failing to pay back money owed) on their mortgages, the banks, like Royal Bank of Scotland, should have been able to cover the losses with their capital (AKA savings). But they didn’t have enough saved. Bummer.

Banker 1: Don’t worry, we can use our savings to pay for it.

Banker 2: Ummm, about that.

Banker 1: Sh*%!!!

 

3) Always have a good friend to bail you out.

The Labour government decided to save Royal Bank of Scotland  by buying up shares in the bank. This meant RBS was declared solvent (able to pay your own way) and was able to get emergency funding from the Bank of England to keep going.

RBS was now essentially publicly owned; the UK government owns around 80% of RBS shares. By pouring money into a bank bailout, they hoped to prevent the bank from failing; which would have led to job losses and depositors losing money. In total around £107.6 billion of taxpayer’s money was spent on sorting the banks out.

Royal Bank of Scotland: Hey dude, nice… yo, can I borrow some money?

Labour government: Oh, guyyyyyyys, c’mon.

Royal Bank of Scotland: Pretty please.

 

4) If you can’t pay it all back don’t beat yourself up.

The government spent £46 billion buying shares in Royal Bank of Scotland. Now a report by independent financial advisers, Rothschild, states that now is the best time to have an RBS sale to start selling the shares.

The small print: because the values of the RBS shares have dropped since they were bought, the government is set to make a loss of £7 billion on the RBS sale.

But because the other banks the government have bailed out have done better; the government is actually set to make a profit of £14 billion. Eventually.

Royal Bank of Scotland: Yeah, so you’ll make a loss, but in the loooong run you’ll actually have more money. #Winning

UK government: Get. Out.

 

5) Don’t sweat the small stuff.

Even though the government is making a profit, they will still be £7 billion down after the RBS sale. So they’ve lost money from bailing out a bank which didn’t do the best job of keeping our money safe. That’s £7 billion which could have been spent on other things.

But as we said, the government is estimated to make a profit overall. So it could be a lot worse.

UK Government: £14 billion profit? Maybe we should do this bailout thing more often.

The Public: Don’t you even think about it.

6) Blame is for stress heads.

People have blamed the bankers for the financial crash, others have blamed the government for not putting enough regulation in place to stop this from happening.

Change is coming; we explored how the new rules mean HSBC is separating its high street branches from the investment side of the bank.

 

Royal Bank of Scotland; word on the street… speculation it seems:

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Do you think the government was right to bail out Royal Bank of Scotland? Should we have an RBS sale now or holding out for a better profit? Should the bankers be punished more for what they did?