RBS Leaves U.K. Asset Protection Plan

Pays $4 billion to insure riskiest assets

Royal Bank of Scotland Group has paid 2.5 billion pounds ($4 billion) to the British government to insure its riskiest assets and agreed to exit the Asset Protection Scheme.

RBS logoBloomberg reported Wednesday that upon the bank’s entry into the government plan in 2009, potential losses on 282 billion pounds in loans and derivatives were covered. However, RBS said in a statement that it never had to draw on the policy, and has since reduced the amount of loans covered to 105 billion pounds.

While it is currently 81% owned by taxpayers, RBS has moved a step closer to a return to private ownership with its departure from the plan. After stepping into former CEO Fred Goodwin’s shoes in 2008 when the government bailed out RBS, Stephen Hester slashed assets by more than 800 billion pounds. He also reduced the bank’s global staff by around 36,000 and cut down on the bank’s securities and Irish units.

In its statement, the bank said that the program “played an important role in stabilizing market perceptions of RBS after the impact of the financial crisis became clearer and the bank’s share price fell to a low of 10 pence in February 2009. This gave time for the bank’s new board and management to put its recovery plan into effect.” It added that the Financial Services Authority (FSA) has granted approval for its exit from the plan.

The Treasury in London released a statement from Chancellor of the Exchequer George Osborne to mark the occasion. Osborne said in part, “During this Parliament the support provided by the taxpayer to the banking sector in the form of guarantees has fallen by over 450 billion pounds, a drop of almost 95%. The government’s strategy remains to return RBS to the private sector when it is value for the taxpayer to do so. Today is a step in that direction.”

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