UK banks will not be allowed to buy Northern Rock, or to take up the taxpayer stakes in RBS and Lloyds TSB, if they have an existing significant presence in the UK.
In a speech made at a dinner for UK business group CBI on Thursday night, Chancellor Alistair Darling signalled that when government support for these companies is scaled back, it would be done so in a way that ‘proactively encourages new entrants’ to the market.
As we reduce and ultimately remove government support in the banking sector, we will do so in a way that proactively encourages new entrants, to build a competitive and healthy banking sector.
Alistair Darling 3/9/9
So what does this mean?
An obvious conclusion would be that Virgin would look to beef up their Virgin Money brand by buying Northern Rock. Another potential buyer is Tesco, who have been working hard on their Tesco Finance brand since buying RBS out of their partnership in July 2008.
For RBS and Lloyds TSB, they will have to find acceptable suitors who are willing to invest in their business, or more likely break themselves up, hiving off parts of the business to third parties (although given RBS’s protracted efforts to offload their insurance division last year, this could be easier said than done).
However, the question remains – who wants to be a bank, or a major investor in a bank these days?
With regulation being tightened by the minute, howls of anguish when large profits are reported and the scrutiny of politicians and the general public watching your every move, a rational investor might conclude that there are greater, and less stressful, returns available elsewhere.