Global money misery hits Royal Bank of Scotland

Oct 12 2008 By Charles Lavery

BANKING giant RBS could be part-nationalised and its chief executive ousted as part of a Government rescue package.

City analysts monitoring the world's financial meltdown preict the state will take a 50 per cent stake unless RBS can immediately raise £5billion from elsewhere.

But they believe the government will only save the bank if chief executive Sir Fred Goodwin stands down.

At the very least they will demand a freeze on his pay which has risen from £1.9million to £5.37million in five years.

Meanwhile shares fell from £521.48 to an all time low of 71.7p on Friday.

And the Sunday Mail can reveal Sir Fred himself has had £7.1million wiped off his personal RBS shares this year.

The bank are now braced for a financial D-day when markets re-open tomorrow. Their Friday fall gave the 281-year-old institution its lowest ranking in 12 years. It is now valued at £11.5billion when this time last year it was £60billion.

This year Sir Fred's salary was £5.375million. A severance payment could be well into seven figures.

Known as Fred the Shred for his ruthless takeover tactics, he has let it be known he will step aside to save the bank.

He was also heavily criticised for his decision to buy ABN Amro earlier this year at a cost of £48billion.

He forged ahead with the deal by paying over the odds when their were already signs of a downturn.

Unless RBS - who employ 120,000 people worldwide - can convince investors to risk all and give them more money the government will be forced to buy shares in Britain's second biggest bank.

Goodwin does have time on his hands as any fundraising will not be judged until the end of this year and the under-fire chief is praying markets stabilise before then.

The government will invest in ordinary shares in RBS which will give it voting rights at the bank.

The entire government rescue package will cost British taxpayers £500billion, prompting accusations the city has been bailed out while those living in poverty are abandoned.

Finance expert Jasmine Birtles said: "I think RBS will be nationalised within weeks. They can't afford an institution like that to go to the wall.

"Fred Goodwin has said he'd be willing to stand down but if I was going to get millions I'd be willing to go too.

"The banking stock is at the top of the FTSE100 and it's the banking stock that dragged everything down so it affects all our pensions and savings. The government will not allow RBS to fail. The knock-on effects would be disastrous.

"I'd not be surprised if by Christmas we had at least one of our banks fully nationalised."

But finance secretary John Swinney said: "RBS is a strong and Scottishbased global player, and speculation based on rumour is not helpful."

Labour's finance spokesman Andy Kerr added: "Brown and Darling have taken decisive and strong action to protect our banking system. With the new package there is an obligation on all banks to behave responsibly.

"Without the strong action from the government, Scottish banks would likely be going under like in Iceland."

Analysts at Credit Suisse said of the package: "The government will likely provide some of this funding but there's a good chance shareholders will get involved with government support.

"The alternative is seeing their bank 20-40 per cent nationalised."