Royal Bank of Scotland has finally closed the “bad bank” it set up nearly a decade ago to sell a slew of unwanted and “toxic” assets after the lender was rescued in a £45 billion taxpayer bailout.
RBS, still more than 70 per cent‑owned by the state after its rescue in the financial crash, announced the closure in a memo yesterday to the 80 remaining staff working there.
The closure of the Capital Resolution division is a milestone on the bank’s long road to recovery in one of the largest ever financial restructurings.
Ross McEwan, RBS’s group chief executive, said: “The closing of Capital Resolution is a key moment for RBS. It has taken nearly ten years to undo the consequences of the global ambitions pursued by RBS in the run-up to the crisis.
“We have gone from a bank with a balance sheet bigger than UK GDP to the smaller, safer bank we are today.”
Mark Bailie, who led the division before becoming RBS’ chief operating officer, said: “Today we are marking the end of Capital Resolution’s journey.
“I would like to thank everyone who has worked so hard, first of all to save this bank, and then to rebuild its capital and reshape it in line with our strategy.” At one stage the division employed 19,000 staff. The Capital Resolution balance sheet – at about £750bn – is £1.5 trillion lighter than when it began selling off assets in 2008 after former fiercely expansionist RBS chief executive Fred Goodwin was ousted as part of the state bailout. Goodwin was subsequently stripped of his knighthood.
The dizzying range of assets sold by RBS included a fleet of aircraft in Beijing, a major hospital in Sydney and a graveyard in the deep south of the US. The ringing down of the curtain on the “bad bank” comes after the UK government said last week that it planned to sell £3bn of RBS shares in the next financial year, in a step towards the lender’s full re-privatisation.
The bank said yesterday it had folded the remaining £23bn worth of unwanted assets back into the bank to be sold or disposed of, including a £7bn stake in Saudi Arabian bank Alawwal.
Some of the remaining staff in the division will stay with the bank, while some will be made redundant, but no figures were available yesterday.
At more than £2 trillion, the Scottish bank had the biggest bank balance sheet in the world in 2008 just as the market peaked, operating in 50 countries around the world.
RBS plunged to a £24bn loss in 2008, the largest in UK corporate history, and has made total losses of £58bn since then as the group has been dogged by regulatory probes and major fines on both sides of the Atlantic.
However, earlier this week the bank’s bolstered balance sheet passed the annual Bank of England “stress test”, having failed it in 2016.
The test of all major UK lenders’ capital strength envisages a highly severe economic scenario including a recession, rising unemployment, a jump in interest rates, and slumps in both the housing and financial markets.