RBS was too big to operate
(16 November 2009 – Europe) The European Unions Competition Commissioner has said that in the end the Royal Bank of Scotland was ‘simply too big to operate and supervise’.
Neelie Kroes, EU competition commissioner said that banks’ ballooning balance sheets should have set off investor’s alarm bells.
In an effort to secure EU backing for the bank rescue program, the Netherlands ING and Commerzbank reduced the size of their businesses and are getting rid of some of their commercial banking units.
The Royal Bank of Scotland said they are also planning to dispose of 318 branches, which equates to 14 percent of its British network within the next four years.
Ms Kroes said she is not ‘some kind of bank destroyer’ but a referee for banking bailouts making sure there is a market in the long-term.
Investors and regulators need to check that large banks have strong long-term business models, Ms Kroes added.
Ms Kroes also commented that many practices in the banks were ‘crazy’. It is appalling that the banks themselves did not understand the risks, but it should also have been obvious.
British banks were clearly overloaded with risk before the crisis, with Lloyds running a loan-to-deposit ratio of 180 per cent and RBS tripling its balance sheets in two years from 2006 growing to be larger than all European economies except Germany, Ms Kroes concluded.
In an effort to secure EU backing for the bank rescue program, the Netherlands ING and Commerzbank reduced the size of their businesses and are getting rid of some of their commercial banking units.
The Royal Bank of Scotland said they are also planning to dispose of 318 branches, which equates to 14 percent of its British network within the next four years.
Ms Kroes said she is not ‘some kind of bank destroyer’ but a referee for banking bailouts making sure there is a market in the long-term.
Investors and regulators need to check that large banks have strong long-term business models, Ms Kroes added.
Ms Kroes also commented that many practices in the banks were ‘crazy’. It is appalling that the banks themselves did not understand the risks, but it should also have been obvious.
British banks were clearly overloaded with risk before the crisis, with Lloyds running a loan-to-deposit ratio of 180 per cent and RBS tripling its balance sheets in two years from 2006 growing to be larger than all European economies except Germany, Ms Kroes concluded.
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