Both Lloyd Banking Group and Royal Bank of Scotland were bailed out at the huge cost of taxpayers. However, as of date, these banks exhibit contrasting trends. While Lloyd Banking Group earned enough to pay its first dividend, and also executed a pay deal with the boss for £11.5m since the crisis in Banks, the Royal Bank suffered losses for the seventh consecutive year with no bonus to its boss.

What makes the difference between the two banks? First thing differentiating the two is the difference in the area of their action. These banks were bailed out in 2008 and 2009, and after that the taxpayers’ stake in Lloyd was 43% while in RBS 81%. To begin with, the control of government in RBS made it an easy target for statesmen and politicians who exploited the bank as they liked. Secondly, the banks had different problems to deal with. Lloyd, particularly HBOS bank, lent too much to the developers of commercial property in Ireland. It relied too much on financial markets to finance its business. RBS, on the other hand, experienced the same problem in fund raising. However, it brought the Dutch bank ABN Amro, a major investment bank, in 2007 that provided only a thin layer of capital for the absorption of losses due to bad loans. RBS had made a record of losses amounting to £24bn in UK’s corporate history at the time of its bailment. The official version of what went wrong at HBOS is still awaited. Nevertheless, the parliamentary commission on banking standards found in 2013 pound 47 billion bad loans of RBS to be responsible for its downfall. The buying of ABN Amro when it was short of capital is also considered a cause for the plight of the RBS.

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