RBS withdraws from APS

A woman walks past an RBS branch RBS will save large amounts of fees by withdrawing from the scheme

Royal Bank of Scotland has moved a step nearer financial rehabilitation and eventual privatisation by withdrawing from the Asset Protection Scheme, an insurance scheme created by the government in 2009 by which losses on RBS's worst loans and investments would have been taken by taxpayers.

In practice, RBS has been able to sell or offload the £280bn of loans and investments put into the scheme without having to transfer any losses to taxpayers. And it has paid £2.5bn for the protection.

But this does not mean the scheme represented bad value for RBS and its owners. Without it, RBS might have felt under pressure to clean itself up faster, which meant it might well have sold its bad loans far cheaper - and actually incurred even bigger losses than it has suffered in recent years.

By withdrawing from the scheme, with the agreement of the Financial Services Authority and the Treasury, RBS will be saving itself £500m a year in fees.

For the Treasury, the end of the APS can be seen as symbolising almost the end of one important form of support for banks that was put in place after the crisis of 2007-8: in March 2010, the Treasury had provided £486bn of insurance, loans and guarantees to the UK's banks (and at the peak in 2009, all financial support by British taxpayers for the banks was £1.2 trillion); as of today, that has fallen to £31bn.

Robert Peston

However, if the UK's banks are no longer wholly dependent on taxpayer support to prevent them going bust, they are receiving significant financial help from the Bank of England - in the form of the Funding for Lending Scheme and the Extended Collateral Term Repo.

The purpose of the Bank of England's newer support is less to keep the banks alive, and more to provide them with funds so that they can provide the credit badly needed by businesses and households, and reinforce the UK's sporadic and anaemic economic recovery.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 105.

    AAR has rights to match any offer by Rosneft. But it does not look as though AAR will exercise that right, given that it has signed a memorandum of understanding to sell its holding to Rosneft.

    Always best to hedge your bets so why would they not put in a counter offer which could boost the price Rosneft have to pay for acquisition of the whole of the company?
    It depends on who blinks first.

  • rate this

    Comment number 104.


    We clearly need more, smaller banks. But there's a balance to be had. A huge plethora of small banks would be even harder to regulate and it's very difficult to have 'small' banks due to the regulatory requirements. They would be very vulnerable.

    The way forward is 'not too small, but small enough to fail' size.

    Remember many smaller banks, especially in the USA, did fail.

  • rate this

    Comment number 103.

    Which, if GO should ever be in Government again, will make his problems with the Benefits bill ever worse!

    He's been very short-sighted on that one ...

  • rate this

    Comment number 102.

    99.SweetChariot81 - ".....It reduces the value of the pound and increases the competitiveness of our exports......"

    Which is why exports to other EU states have gone up by 8% since the election, though that still doesn't stop the Coalition blaming Eurozone woes for our woes......

  • rate this

    Comment number 101.

    99 & 100. Not to mention persecuting the savers and pensioners by devaluation and eroding their purchasing power after they have been prudent over the years... a lovely gift for those who have put into the system all their lives.... printing money wouldn't be so bad if it had been distributed to the populace instead of giving it to the financial plutocrats to prop up a failed system and bonuses.


Comments 5 of 105


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