A small but important detail buried in the third-quarter results of Royal Bank of Scotland – which produced a pre-tax profit of £2bn, albeit because of an accounting quirk – helps to illustrate just how differently the bank is being run now than in 2008 when it ran out of money.
In 2008 the bank needed to find £350bn in the money markets to keep operating each year but had only £90bn in so-called liquidity reserves – assets that can be sold quickly and are in effect regarded as cash. Now, while the bank still has £141bn to refinance in the next year, its pool of liquid reserves stands at £170bn – considerably more than its funding needs.
In fact, in an effort to show just how prudent he is being, Stephen Hester stated on Friday that he was running the bank on the basis that the all-important funding markets for banks would not open next year. He does not think that will actually happen, but he prefers to take no chances.
