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Bailed-out banks right to back Help to Buy 2 – UKFI chair

  • 12/11/2013
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Bailed-out banks right to back Help to Buy 2 – UKFI chair
State-owned banks are repaying their debt to taxpayers by signing up for Help to Buy 2, the scheme’s administrator has suggested.

UK Financial Investments chairman Robin Budenberg, who runs the parent company of UK Asset Resolution, was giving evidence to the Treasury Select Committee.

He said Lloyds Banking Group and RBS made the decision to participate in the mortgage guarantee scheme on their own.

However, he added: “It is right that RBS and Lloyds, as the people who have used the goodwill and the money of the UK taxpayer, are at the forefront of contributing to these types of schemes.”

In July, the government appointed UK Asset Resolution, UKFI’s subsidiary holding former Northern Rock and Bradley & Bingley loans, to administer the second part of the Help to Buy scheme.

Budenberg told MPs the Treasury had approached UKAR because of the skills of its staff.

However, a number of board members feared the extra role could distract from the task of managing the bad loans. “There was a very serious discussion on the board of UKAR,” he said.

Questioned about the bailed-out banks’ exposure to scandals, Budenberg identified issues around mortgage [portfolio] trading: “We have seen at JP Morgan that that could be a potential liability.”

In October, US regulators fined the bank $5.1bn for misleading government-backed loan firms on the quality of its mortgages.

Budenberg revealed UKFI pushed for former RBS chief executive Stephen Hester to go, although the bank’s board had made the final decision. “Our view was it made sense to have a new chief executive in place before RBS returned fully to the private sector,” he said.

MPs have previously slammed UKFI as a “fig leaf” for government interference in the day-to-day running of the bailed-out banks, particularly in RBS. However, newly-appointed executive chairman James Leigh-Pemberton described UKFI as an activist shareholder: “What we are not meant to do is run a bank on a day-to-day basis.”

He said UKAR continues to focus on running down the books of Bradford & Bingley and Northern Rock: “The financial performance of the company has been particularly satisfactory.”

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