RBS seeking to restrict its APS exposure
Royal Bank of Scotland is working on plans to slash the value of toxic assets it dumps in the government’s asset protection scheme (APS) by up to £60bn.
The nationalised bank declined to comment on growing speculation over the weekend that it will reduce its exposure to the APS. Rival Lloyds Banking Group is preparing to sidestep the scheme altogether.
RBS had been expected to insure a total of £325bn in bad assets but is now believed to be working on ways to cut that to below £300bn and possibly as low as £265bn, according to reports. RBS, 70 per cent owned by the UK taxpayer, is expected to announce a plan within three weeks. Any proposal will be subject to the approval of the government and the European Commission.
An RBS spokeswoman said yesterday that negotiations with the Treasury over use of the APS were ongoing. She would not comment on reports of the £60bn reduction in assets to be placed under protection. Even if RBS manages to cut its exposure by £60bn it is thought that the cost of taking part in the scheme will remain unchanged at £19.5bn.
The new effort to reduce the government’s control over the bank has been spurred by an improving outlook for the banking sector and wider economy as well as the expiry of some of its riskiest loans over the past few months. RBS confirmed last month that it had been talking to shareholders to gauge support for a cash call believed to be in the region of £3bn – £5bn as an alternative to issuing the government “B” shares.
The Edinburgh-based bank is likely to have to sell parts of its small banking business to get the rubber stamp from the European Commission.