Details of RBS pain revealed by Treasury
The full extent of the Royal Bank of Scotland’s stricken assets were made public yesterday, when the government published details of the insurance scheme set up to stabilise the bank.
The Asset Protection Scheme (APS), which will insure £282bn of the bank’s assets, covers £15.4bn of residential mortgages, £80bn of loans, £39bn of derivatives, and £54.5bn of consumer finance, which also includes property-backed loans and loans to small businesses.
The Treasury said that of the £282bn of assets, £114bn originated in the UK, with £75bn in other parts of the EU, £43bn in the US and £48bn elsewhere in the world.
The Treasury also confirmed the bank would have to bear losses of £60bn on the assets before the government will step in. The government and the bank agreed in February to ring-fence assets that were turning sour.
Financial services secretary to the Treasury Paul Myners said the agreement provided a “much-improved” position for the taxpayer. “RBS will bear a much greater share of the burden, with the first loss increasing by £18bn. The bank will also pay the full operational costs of the Asset Protection Agency,” Lord Myners said.
RBS is paying the Treasury £45m for running the APS.
The Treasury yesterday confirmed it would make a capital injection of £25bn as part of the scheme. Following its approval, the government will effectively own an 84 per cent stake in the bank.
The APS will also cover RBS’ spending on 120 aircraft leasing deals in North America, 47 oil tankers and 20 container ships, German office blocks and Australian infrastructure projects.
Some of the foreign loans RBS made include a vast portfolio of loans to Irish and Northern Irish businesses and customers, including £2.9bn worth of negative equity mortgages in Dublin and throughout Ireland.
The bank also made £3.1bn of loans to hedge fund managers, almost half of whom were based in the Cayman Islands and a third in the US.
The government did not reveal whether any loans to Dubai, to which RBS is believed to have the greatest exposure of any UK bank, are included in the APS.
Lloyds Banking Group was also planning to join the APS but is instead going ahead with raising private capital. It has paid the Treasury £26m for its share of the costs of the APS.
RBS involvement in the Asset Protection Scheme will insure £282bn of the bank’s assets
Including:
£15.4bn
of residential mortgages
£39bn
of derivatives
£80bn
of loans
£54.5bn
of consumer finance*
Of the £282bn assets, £114bn originate in the UK, with £75bn from other parts of the EU, £43bn in the US and £48bn elsewhere in the world
*which also includes property-backed loans and loans to small businesses.