Reports
RBS To Shed Businesses As Condition Of Receiving UK Aid
Royal Bank of Scotland, parent of firms such as Coutts, the UK private bank, announced it will sell off RBS-branded branches in England and Wales and spin off some other assets as part of European Union laws over bailout money from the UK government.
The embattled bank, beset by heavy credit write-downs, said it had reached agreement with the UK government on its participation in the Asset Protection Scheme, the programme set up by the administration to bail out the bank.
“The broad principles of the announcement made on 26 February 2009 remain applicable. However, the key commercial terms which have now been agreed better reflect the current needs of RBS. They combine a reduction in the overall asset pool, a higher first loss piece, and an annual fee as opposed to an upfront lump sum,” the bank said in a statement.
“The re-priced scheme is designed such that RBS absorbs all of the expected losses in a base case economic scenario and only calls upon the second loss HMT [HM Treasury] cover in the event of a substantial further deepening of the recession,” the statement said.
The bank said the proposed terms of the APS will provide RBS with “appropriate protection in extreme stress scenarios and a robust starting capital position”.
Opening size of asset pool as at 31 December 2008 has been reduced from £325 billion ($530.4 billion) as reported on 26 February 2009 to £282 billion on a like for like basis.
First loss on pool, including provisions as at 31 December 2008, increased to £60 billion from previously announced £42.2 billion and includes historic impairments as at 31 December 2008 of £21.3 billion.
The cost of APS cover will be paid for with an annual fee of £700 million in 2009-2011 dropping to £500 million thereafter, payable in cash or, subject to HM Treasury consent, either in tax losses treated as Deferred Tax Assets or B Shares. The previously announced initial fee of £6.5 billion no longer applies.
Under the revised agreement, the UK government’s ordinary shareholding in RBS will remain at 70.3 per cent.