It could take more than a decade for the UK Government to get its money back following the bank bail-outs as increased regulation and eurozone debt fears drive away investors, it was reported Sunday.
The taxpayer is now sitting on a 30 billion pounds loss on its 83 percent shareholding in Royal Bank of Scotland and 41 percent stake in Lloyds Banking Group following last week's stock market rout, according to the Sunday Times newspaper. Senior sources said stiff new regulations forcing the banks to horde more of the their money and the threat of further stringent reforms proposed by the Independent Commission on Banking (ICB) have put-off investors. It could take at least a decade for the shares to recover to the level paid by the Government, while some analysts have warned that the tough line of reform could kill the prospect of a sale altogether. The ICB has suggested that banks be forced to ring-fence their investment and retail arms with the aim of making them less likely to need bailing out again in the event of another financial crisis. But the banks have warned that the proposals would limit their profits, making them less attractive to investors. Banking shares are also suffering amid fears the global economy is heading back into recession, while investors are also wary of lenders' potential exposure to bad debts in struggling eurozone countries, such as Greece. Both banks last week reported heavy losses as they struggled amid the global financial chaos. One top rated analyst told the newspaper: "As things stand today, with the pressure on returns coming from regulation, the tough attitude of the Bank of England, and the noises coming out of the ICB, the taxpayer will be holding those shares indefinitely. "Neither bank has any story to tell investors. There's no reason to buy the shares." Last week's stock market rout wiped 21 percent and 24 percent from the share price of RBS bank and Lloyds respectively. Shares in RBS closed at 28 pence on Friday - a long way off the Government's break-even point of 51 pence. Lloyds shares closed at 33 pence - less than half the state's entry price.