Best of a bad job

26 October 2009 By George Hay Follow @gfhay

The UK bank has tentatively signed up for expensive state insurance that it now might not need. Unlike rival Lloyds, there s no prospect of statecontrolled RBS cancelling the policy outright. But it seems to have devised some sensible ways of making the scheme cheaper.

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Context News

Royal Bank of Scotland is planning to cut the assets it will put into the UK state's asset insurance scheme by £45bn, the Times reported on 24 October.

RBS agreed in February to put assets with a par value of £325bn (£144bn of riskweighted assets) into the scheme. It was to take the first £19.5bn of losses, pay a £6.5bn fee and give up around £9bn of credits allowing it to offset current losses against future taxes.

The bank now wants to put around £280bn assets in, according to the Times because the underlying quality of some of the loans has improved and some have been paid back. It is also seeing whether it can negotiate a higher first loss in return for a lower fee.

The bank may still be required to raise more capital due to the fewer assets going in to the scheme. The UK government has £6bn of extra capital assigned as backup in February, but the bank has been investigating to see if it could raise the sum privately.

Context News

Royal Bank of Scotland is planning to cut the assets it will put into the UK state's asset insurance scheme by £45bn, the Times reported on 24 October.

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