The Royal Bank of Scotland is planning to spin off its retail, commercial, global banking and markets business into two separate units. This comes after the Reserve Bank of India (RBI) decided not to treat the sale of RBS?s retail and commercial assets to HSBC as a portfolio sale and hence not transfer any branches to HSBC. Accordingly, the bank plans to house its retail and commercial businesses under RBS Bank and global banking and markets would be placed under RBS.
In July 2010, HSBC said it would acquire select assets of RBS for a premium of $95 million (Rs 444 crore) over the net asset value of the business, which has not been set yet. The price will be subject to clawbacks depending on losses in unsecured lending in the two years after the deal is completed.
?The bank?s senior management has communicated this plan to RBI. The move comes after the central bank insists on treating the sale of the retail and commercial assets to HSBC as a portfolio sale and hence not transfer any branches to HSBC,?? said a source. ?If we follow this strategy this would effectively mean we are selling RBS NV to HSBC. Which would effectively mean a separate legal entity is being sold to HSBC, making it a bank sale. However, necessary regulatory approvals would be required,?? added the source.
RBS NV was initially floated to house the businesses that were acquired from ABN AMRO. Headquartered in the Netherlands, RBS NV has the Dutch Central Bank (DNB) as its home regulator. Thus making it a seperate legal entity being sold to HSBC.
The RBI has yet to form a view on this proposal. However, experts say that this would delay the sale and its unlikely that the RBI would permit such a structure. RBS spokesperson responding to an email query said, “We are continuing to work closely with the regulator towards completing the sale of our retail & commercial businesses in India to HSBC.??
RBS, which had acquired 31 branches in the country when it bought out the ABN Amro Bank NV?s Asian operations in 2007, had decided to retain five branches and surrender the remaining to RBI. Following this, HSBC was to apply for fresh licences. In June 2009, the RBI had conveyed to RBS (the erstwhile ABN Amro Bank) that branch licences are not transferable.