THE decision by the Church
Commissioners to join a new banking consortium marks a new hands-on
approach to investment, the Commissioners' Secretary and chief
executive, Andrew Brown, said this week.
Mr Brown spoke to the
Church Times after the banking giant Royal Bank of
Scotland (RBS, above) announced that a Commissioners'
backed consortium had been selected as the preferred bidder for 314
of its branches, which will be spun off from the bank to comply
with European Union state-aid regulations. The plan is for a new
ethical bank under the old Williams & Glyn's brand.
"The Commissioners always
have a hands-on approach to their investments," Mr Brown said. "We
have worked with companies as diverse as BP, Barclays, News
International, and the mining company Vedanta. In many cases, they
listen to us. Occasionally, as with Vedanta and News International,
they do not reflect this in ways we find acceptable. That is why we
chose to divest from them.
"Our investment in Williams
& Glyn's will be much earlier in the business's creation. The
opportunity to be involved in the development of an ethical bank is
very exciting, and we believe will be good for both the customers
and staff of the new bank, as well as in the communities in which
it has branches. It will also, we believe, be a good investment for
The EU ordered RBS to divest
itself of 308 RBS branches in England and Wales, and six NatWest
branches in Scotland, by the end of this year, in return for
agreeing to the British Government's 2008 rescue package, in which
the state took an 84 per cent stake in the bank. A deal to transfer
the branches to the Spanish banking group Santander collapsed last
An RBS spokeswoman confirmed
that the bank will not complete the divestment by the end of this
year, and will work with the Treasury and the European Commission
to seek an extension.
The Prime Minister and three
of his cabinet colleagues are ex-officio Church Commissioners.
Parliament is also represented through the membership of the
speakers of both Houses of Parliament, and the Second Church
Estates Commissioner, Sir Tony Baldry MP. But Mr Brown insisted
that the Commissioners' decision to invest in the new Williams and
Glyn's bank did not come about as a result of government
A proposal was put to the
First Church Estates Commissioner, Andreas Whittam Smith, on
investment grounds, Mr Brown said, noting that the recent
involvement of the Archbishop of Canterbury on the parliamentary
Banking Commission "would have helped".
"The other consortium
members recognised that there was a pressure on banks to be
ethical, Mr Brown said, and that the involvement of the Church
Commissioners would be advantageous.
A spokeswoman for RBS said
that much of the preparation to create the new Williams &
Glyn's branch network had already been done, including the creation
of a stand-alone IT platform for the new bank; but work still
needed to be done to ensure regulatory compliance and approval
before the new bank could be launched.
Under the deal announced
last Friday, the Church Commissioners will invest £60 million, part
of a total investment of £600 million by a consortium which also
includes Corsair Capital, Centerbridge Partners, and RIT
The consortium's investment
will be contained within an RBS Group bond, which will be converted
to a minority shareholding in the new Williams & Glyn's bank at
the time of an initial public offering (IPO) in about two years'
time. They will be able to take an additional ten-per-cent stake in
Williams & Glyn's at that time, so long as their total
shareholding remains below 49 per cent.
The RBS and NatWest branches
that will form the Williams & Glyn's bank currently have 1.7
million customers, £19.7 billion-worth of loans, and customer
deposits of £22.2 billion. The number of employees is expected to
rise from about 4500 to 6000 by the time the new bank launches. The
new bank will have an estimated five-per-cent market-share of the
small- and medium-sized enterprise and mid-corporate banking
markets, and a two-per-cent share of UK personal current
The Church Commissioners say that the new bank will be "a
vigorous challenger" in UK business and retail banking.