RBS to pull out of costly asset insurance scheme

By DOMINIC JEFF
Published on 17/10/2012 10:35

Royal Bank of Scotland is withdrawing from an insurance scheme set up during the banking crisis to cover its riskiest loans, in a move that should save the taxpayer-backed bank at least £500 million a year.

The bank said it would pull out of the scheme tomorrow after payments into the Asset Protection Scheme (APS) reached the minimum £2.5 billion mark, enabling it to ask the Treasury and the Financial Services Authority for permission to opt out.

Exiting the APS marks a significant milestone in the 
recovery of RBS and help clear the way for an eventual sale of the government’s 82 per cent stake.

Chief executive Stephen Hester said: “We all want a system in which banks will never again need to seek credit support from government in a financial crisis. Huge progress has been made towards that goal and our exiting the APS is a significant milestone in RBS’s recovery.

“The APS has played a valuable role, buying time for the bank as we implemented change from the worrying days of 2009 to create the much stronger institution it is today. RBS’s capital, liquidity, and funding positions have been transformed in the past three years, so the time is now right for us to exit this scheme.

“The bank remains wholly committed to supporting its customers in the years ahead. Despite the scale of the Group’s overall risk reduction and balance sheet shrinkage, RBS has actually grown its UK loan book for core retail and corporate customers by four per cent overall since 2008.

“The changes RBS needed to make after 2008 were truly radical. Much progress has been made along that road. There is much work still underway. But RBS and all who rely on us are better off for the strong progress already made.”

The APS capped potential losses on £282bn of RBS’s most toxic assets following the bailout. RBS, which hasn’t made a claim through the scheme, has since shed most of those assets and recently said the APS was now “essentially worthless” in terms of providing cover.

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