Commissioners pursue reform by backing new bank

04 October 2013

AP

"Vigorous challenger": the RBS offices, in central London 

"Vigorous challenger": the RBS offices, in central London 

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 Commissioners."

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 October.

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 pressure.

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 Capital.

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 accounts.

The Church Commissioners say that the new bank will be "a vigorous challenger" in UK business and retail banking.

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