Royal Bank of Scotland Under Pressure to Sell Art Collection

The Wall Street Journal is reporting the Royal Bank of Scotland is under pressure to sell portions of its art collection. The collection is estimated to be worth between $16 million and $24 million. The bank is currently owned by the UK government, and there is pressure to capitalize the collection as art is not considered a core asset by the bank or regulators.The bank is taking a slow and methodical approach in selling the collection.

The bank is closing about 400 branches and an insurance division and will have less space to display art. It will also send some art to galleries and museums. The liquidation plan seems to incorporate waiting a period of time in order for the market to both stabilize and perhaps advance before final decisions are made to sell.

The WSJ reports

A spokeswoman said: "We will not sell any pieces of art that are of heritage or historical importance. Nor will we sell pieces which national galleries or charities may wish to exhibit. Once we have worked through this process, if there are works of art that do not fall into either of these categories we may consider selling some works."

She added: "Any decision on sales will be taken with an eye to market conditions to obtain the best value for our shareholders."

Art prices have contracted by a total of 37% since January 1, 2008, according to information provider artprice.com. After promising signs of a nascent recovery in the first half of 2009, the third quarter witnessed further price drops, although there are now signs of a recovery.

There have been calls for government-backed banks to dispose of their collections. Ben Lewis, an art commentator, said: "All the banks who received state aid should have firesales of their art collections ??? in fact, governments should enforce these sales ??? that would take some of the heat out of the inflated art market, and put a bit more money back into government balance sheets."

Some banks have already started this process. Annabel Fell-Clark, chief executive of insurance provider Axa Art, said: "In recent years some banks have divested themselves of any large art collections as it has not been considered as adding value by shareholders. Back in the 90s it was the Japanese banks that had to sell a load of art because of their own economic crisis."

Since the credit crunch hit, other corporates have sold art to plug gaping balance sheets. Zurich-based UBS (UBS) in April shut down its 11-year-old "art banking" unit, which enables wealthy customers to purchase works and build collections.

As far as corporate collections go, RBS' collection is relatively modest.

To read the WSJ article, click HERE.