LONDON (Reuters) - Senior British government figures are discussing the possibility of buying out private investors in Royal Bank of Scotland (RBS.L), the Financial Times reported on Thursday.
Ministers are discussing a potential full nationalization of RBS, which is already 82 percent owned by the government, to help boost business lending to companies.
The remaining 18 percent of the bank is owned by private investors and it would cost the government around 5 billion pounds ($7.79 billion) to buy them out, the FT said.
British finance minister George Osborne is opposed to fully nationalizing RBS, which would mean taxpayers taking full responsibility for the bank’s toxic debts.
The Treasury did not immediately respond to a Reuters request for comment.
The British finance ministry on Wednesday launched its latest scheme to free up credit, but some at the top of government believe forcing RBS to lend more is the only way to push the banks into action, according to the FT.
This would mean directing the bank to increase its lending to companies, which would be open to legal challenge by the remaining shareholders. The only way to get round this is to buy out those shareholders, the FT said.
A full nationalization was not on the agenda, an industry source said, citing several reasons why the Treasury would not have the appetite for such a move.
In addition to the extra cost, EU regulators would be unlikely to allow a state-owned RBS to aggressively undercut rivals on lending, and the government would attract more criticism for bonuses, lending and issues like the Libor interest rate rigging scandal if it wholly owned RBS, he said.
Business Secretary Vince Cable is in favor of a split in RBS to create a business bank with a clean balance sheet and a mandate to expand lending to businesses.
Britain used about 45 billion pounds of taxpayers’ money to rescue RBS, and eventually aims to sell it back to the private sector.
RBS did not provide a comment to Reuters.
($1 = 0.6415 British pounds)
Reporting by Stephen Mangan; Editing by Bob Burgdorfer