The Royal Bank of Scotland has reported a rather enormous loss of 1.4 billion Pounds for the first half of 2011, due in large part to the ongoing economic crisis, particular regarding the Greek debt, which will leave RBS unable to recoup its loans to the Greek government in their entirety. Also cited as a major cost were the losses stemming from Ulster Bank operations in Ireland and Northern Ireland.
Such announcements have become somewhat common in recent months, with other major banks in the UK and abroad reporting significant losses, such as UBS, Credit Suisse, Bank of America and others, with many reporting or announcing significant job cuts due to the necessity of streamlining operations. RBS has announced it will cut a further 2000 jobs over the next year or two, on top of the nearly 30,000 it has already cut since the financial crisis. With banks cutting jobs left and right (even banks which have been reporting profits), there will likely be an extraordinarily large number of ex-bankers in various countries, and the sector is not likely to recover in the near future, as difficulties stemming from American and European debt mismanagement continues to impact the broader global economy, even as emerging markets continue to post rather positive results.
Analysts are alternately optimistic and pessimistic about the prospects of RBS’ performance in the future, as it retains a large number of problems going forward and is unlikely to come out of the crisis soon, despite reports of positive development and efficiency measures (including but not limited to job cuts) which will streamline operations and make the bank more profitable, both in the long and short term.
With the bank now 84% owned by UK taxpayers, along with others, as well as in other countries, the banking sector is now shouldered with the burden of propping up the economy to repay the investment made by the citizens of those countries, and any job cuts are likely to be viewed with disapproval, despite the oftentimes necessity of doing so to become profitable again. Investors are likely to be unsatisfied for the near future, as they are saddled with the costs of failed banks, and a call for financial reform should be the paramount request among the voting public, to prevent such a disaster from happening again in the near future.
With the currently under siege Dodd-Frank bill in the United States being undermined as much as possible by the Republican party, prospects for change are somewhat slim, in certain countries, and the prospect of a further bailout seems rather likely to occur, perhaps repeatedly. Iceland’s example of allowing its banks to fail may soon come to be seen as perhaps the correct thing to have done, as the prophesied economic consequences fail to materialize.
With the Eurozone and European Union both at stake in these crises, political leaders will be under significant pressure to pull their countries and others out of the mess, which will of course bring into question the concept of the Union to begin with; it will only be a matter of time if the economic disasters continue that citizens will begin clamoring for succession. If the experiment of the European Union is to succeed, this crisis needs to be handled quite well, rather quickly, and in such a way as to prevent further disaster.
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