FTSE 100
Dow Jones

Monday, 28 September 2009

Business screwed by the state again

The Daily Telegraph carries an interesting story today to the effect that if a medium sized company wants to borrow or extend its credit lines with RBS, they have to sign a letter to the effect that RBS will be mandated as their advisor for debt and equity issues. Now neither RBS nor NatWest were ever particularly famous for their advisory work, although they were both big players in sterling debt underwriting, although many people can do that with a big enough chequebook.

But the big concern must be whose interests will they look after if a fund raising is required in the case of a significant "credit event", a merger or an acquisition? Why their own, of course, because as a lender they can never give truly independent advice.

So a bank that was only a few months ago teetering on the verge of disaster is now able to hold the UK market to ransom, because its tax payer supplied funding makes it one of the few banks able to provide new credit to the market.

But is the government going to do anything about it? Of course not, because the flow of fee based advisory income will boost the RBS share price before the government sells its shares.

No comments: