The Government must hold its nerve on bank stakes Once, the chief fear of City commentators was that the timetable for selling off our sizeable public share of RBS, and especially Lloyds Banking Group, would be driven more by the electoral timetable than the desire to maximise taxpayer value. The squeeze in public spending and household budgets, together with the continued deterioration in the public finances may yet tempt the Coalition to rush for whatever cash it can extract this side of May 2015. However, if this necessitates selling at a substantial discount it should be resisted. The persistent uncertainty surrounding the precise terms of banking reform will almost certainly depress further the value of our collective holdings in RBS/Lloyds. Until recently, the most likely scenario was that the Treasury would start from next year an aggressive programme of selling specific divisions in these banks. No longer. The necessity that any such sale maximises proceeds all but rules out any 1980s-style privatisation public offering. Any attempt to recreate the glory days of a "Sid-style" public campaign would bring in considerably less revenue than a part-sale, for example, to a sovereign wealth fund. What should trouble Conservatives is that five years on from the financial crisis, our largest financial institutions continue to operate in an unholy alliance with government. Even those institutions functioning without official state support have an implied guarantee and inevitability of survival, giving them a commercial advantage over new competitors, whose entry to the market is effectively barred. Much of this stems from the deals done by the last government in the autumn of 2008. One of the curiosities of the global bank bail-out has been the consensus that it symbolised courageous government action at its best. However, I believe serious strategic mistakes were made at the time. While the banks undoubtedly presented the Government with a huge crisis, the Treasury was in a position of enormous strength - as is any organisation about to spend colossal sums of money - and should have recognised that the status quo no longer existed. Moral hazard could have been sewn into the heart of the regulatory system, with recapitalisation a deeply unattractive last resort rather than an ultimate backstop and commercial advantage. With the Government driving a hard bargain, the fear of bail-out would have been a better regulator of behaviour than new laws or fresh bodies to police the system. If a better deal had been secured for the taxpayer, with year-by-year forecasts on the value of its stake, the debate on the future of banking might have been shaped differently. Instead, there has been a sense that the biggest risk-takers extricated themselves from the crisis scot-free, dumping taxpayers with rotten husks, apparently serving the needs of executives before taxpayers. In their impotence, politicians have tried to placate the public with a damaging campaign of vitriol against the financial services sector and its employees. Nothing can change the original terms negotiated during those 2008 bail-outs, but we must learn from them: beware the vested interests; be sure to exact terms in line with the risks taken; robustly define the strategic objective in the general national interest. This is no time for a loss of nerve by the Government with a quick fire-sale. Instead, it must redouble its efforts to maximise taxpayer value.