Speaking at Investment Week`s Summer Investment Senate in Monte Carlo, Darling said he agrees with outgoing RBS CEO Stephen Hester that it could take a decade to sell taxpayers’ stake in the bank.
“There are lots of bank shares about to come on the market, but I do not think the government should rush into anything like a firesale. It will have to be done gradually, even for Lloyds.
“I have no objection in principle to a discounted share offering at the start, provided your overall strategy is to maximise returns, but what I would object to would be doing that before the next election in a re-run of the ‘Tell Sid’ privatisations of the 1980s.
“The key thing is for the sales to be driven by economics, not politics, and it will take time.”
His comments came in the week current Chancellor George Osborne unveiled plans to start selling down taxpayers’ 39% stake in Lloyds. However, the government has put on hold plans to offload its 81% stake in RBS, as it investigates the case for splitting the bank.
Darling warned a potential division of RBS into good and bad banks, five years after its rescue, would be expensive and a “big mistake”.
“Given the bank has already been running internally as a good and bad bank for the past five years, I would not see the point in doing that,” he said.
Darling was addressing wealth manager delegates at the Senate on the day of the release of the Parliamentary Commission on Banking Standards’ Changing Banking for Good report.
He said he particularly welcomed its proposals to ensure key people at banks are held personally responsible for certain activities, which could even lead to bankers being jailed for reckless misconduct.
Darling added the idea someone has to be held responsible could even be extended to the wider financial services industry, while there is still more work to be done in this area for boards and CEOs.
He also called on the government to take further action to improve competition in the banking sector.
“If the government does not do something about it, we run the risk there will be no new challenger back on the UK high street which is very important for competition in terms of the availability of lending, as well as pricing. Making it easier for people to switch between banks would also help improve competition.”
Although he is confident the UK and US have taken steps to start cleaning up their banks, he is not as happy with the situation in Europe.
“I don’t think the eurozone went about cleaning up its banks in the same way as we and the Americans had to do. Unless, and until, people believe these banks have been cleaned up, there is a risk they will think a crisis could happen again and this could hold back confidence in the eurozone in particular.”
