REVOLUTION ON THE BANKING HIGH STREET – KEY POINTS
ASSET PROTECTION SCHEME
RBS:
• Will receive a £25.5bn capital injection from government: £13bn upfront; £6bn of discretionary capital; and £6.5bn in a fee taken as capital.
• Toxic assets placed in the APS cut from £325bn to £282bn.
• RBS must cover first £60bn – not the £42bn that was first envisaged?– of losses on toxic assets in return
for not giving up tax losses and allowances.
• Government to put aside £8bn in emergency capital if RBS’ Tier one
capital falls below five per cent.
• Upfront £6.5bn fee to join APS scrapped in favour of £70m a year
for three years, then £500m a
year for the life of the scheme.
• RBS to pay a minimum exit fee, the largest of either £2.5bn or 10 per cent of the actual regulatory capital relief received from the scheme.
• Global Banking and Markets can be ranked no higher than number five in the combined global all debt league tables over next three years.
• Government’s economic interest rises to 84 per cent but its voting rights remain at 70 per cent.
LLOYDS:
• Will not participate in the APS
and will instead pay a £2.5bn break
fee.
• Will raise £21bn through a combination of a £13.5bn rights issue and a £7.5bn debt for capital swap.
• Government shareholding remains
at 43 per cent.
ADVISORS
• Credit Suisse and Deutsche Bank advised the Treasury.
DIVESTMENTS
RBS:
• Must sell Direct Line, Churchill and Green Flag insurance businesses within four years.
• RBS-branded branches in England and Wales and NatWest branches in Scotland will be sold.
• Must also divest of credit card arm Global Merchant Services and its stake in commodities trader RBS Sempra.
LLOYDS:
• Must sell Lloyds branches in Scotland as well as Cheltenham & Gloucester branches and the Intelligent Finance online business.
POSSIBLE BUYERS
• Those who have stated interest in assets on the block include Sir Richard Branson’s Virgin Money and National Australia Bank, owner of Yorkshire and Clydesdale banks, which said it is “watching events”.
• Groups thought to be interested include Spain’s BBVA and Santander, French banks BNP and Société Générale. Tesco has stated its intention to begin retail banking operations but so far has said it would achieve that aim organically.
• Private equity firms who eyed Northern Rock and may be interested include JC Flowers and Texas Pacific.
BONUSES
• RBS and Lloyds will not pay discretionary cash bonuses to any staff earning over £39,000 this year.
• Executive board members of both banks will defer any bonus payments due this year until 2012.
• RBS boss Stephen Hester said: “We will be making extensive use of deferred payments and payments in shares”.