Quasi-nationalisation in the UK banking crisis: A problematic policy option

The systemic banking crisis in 2008 led to the quasi-nationalisation of two UK listed banks: The Royal Bank of Scotland and Lloyds Banking Group (National Audit Office, 2010). Using property rights and agency theory as the theoretical frameworks, this paper analyses whether the quasi-nationalisation of these banks has been successful. It is argued that as a rescue mechanism, quasi-nationalisation was a positive development. However, questions arise over its effect as an instrument of banking reform. The State's arm's length approach to management represents a lost opportunity to change the culture of profitability over people that contributed to the banking crisis.