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JOHN KINGMAN, the chief executive of UK Financial Investments (UKFI), announced last week that he would step down. UKFI is the body within the Treasury that manages the taxpayer’s stake in the partly or fully owned banks.
Mr. Kingman cited neither a reason nor a date for his departure, but his decision gives a political signal. The government’s strategy for restoring the banking system to health is in a state of drift, if not outright chaos.
The question of what to do with the newly acquired stakes in the banking sector has no clear answer. UKFI controls stakes in Royal Bank of Scotland and Lloyds HBOS, and it owns Northern Rock and the mortgage business of Bradford & Bingley. Mr. Kingman’s departure renders the issues still more opaque.
Regardless of politics, the government must give a clearer sign of its intentions with regard to the taxpayer stakes in the banking sector. Its initial decision to inject fresh capital into the banks was right, as was the requirement to protect the taxpayer’s interest by taking direct equity stakes. In principle, the government ought to hold those stakes until confidence returns to the banking system and to financial markets, and then sell them at a profit.
In practice, UKFI on behalf of the taxpayer will need to hold these stakes for some time yet, possibly for several years. The Treasury needs to give a sense of direction. And a rudderless ship is ill suited to the task.
Regardless of politics, the
government must give a clearer sign of its intentions with regard to the taxpayer stakes in the banking sector.