Fri, 30 May 2025

Fri, 30 May 2025 UK taxpayers no longer own NatWest - but 17 years on, are banks safer from collapse?

The last shares have been sold from the RBS bailout during the financial crisis. But, with banks facing fresh risks today, has enough changed?
1. Alternative methods of rescuing a failing bank: The Bank of England now has alternative methods for rescuing a failing bank, such as buying assets and providing emergency cash, rather than relying on public money. 2. Improved resilience of British banks: British banks hold more cash in their coffers and have increased their capital cushion, making it less likely that a bank would collapse. 3. New risks to consider: The threat of cyber attacks is now a major risk for banks, and recent bank collapses in the US highlight the vulnerability of modern banking systems to digital bank runs. 4. Lessons from the past not fully learned: Some critics argue that it took 17 years to reverse out of the shares in Royal Bank of Scotland (RBS), suggesting that lessons from the past have not been fully learned. The article also highlights some key statistics: 1. RBS had $2.2 trillion on its balance sheet when rescued: This is a massive amount, and it's surprising that RBS was able to recover and return to profitability. 2. Alternative methods of funding are available: The finance secretary mentions that £339m funding from the Treasury was short of the £700m needed to plug gaps in Scotland's public purse, highlighting the need for alternative funding sources. Some potential implications of these developments include: 1. Increased focus on cyber security: Banks and financial institutions will need to prioritize cyber security to prevent attacks on their systems. 2. Changes in regulatory policies: Regulatory policies may be updated to reflect new risks and challenges facing the banking industry. 3. Public trust in banks: The recent bank collapses have highlighted the importance of maintaining public trust in banks, which is essential for their functioning. Overall, this article provides a thoughtful analysis of the lessons learned from the financial crisis of 2008 and how they can be applied to prevent similar crises in the future.
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