Royal Bank of Scotland is to exit the Government’s asset protection scheme tomorrow.
The APS, which was set up in January 2009, provides Government protection to participating lenders against losses on things like mortgage books, personal loan books, bonds and derivatives. Its aims to increase confidence in the participating institutions, allowing them to more easily raise capital.
It works like an insurance policy, where the bank absorbs the first 10 per cent of losses – like an excess on a conventional insurance policy – and the Government absorbs any further losses.
RBS and Lloyds Banking Group agreed in principle to participate in the APS in February and March 2009, respectively. Lenders had to pay £2.5bn to the Treasury to participate in the scheme.
The Government agreed to insure £282bn of assets when RBS formally entered the APS in November 2009. Those assets have fallen to around £105bn today. RBS did not claim on the scheme.
Group chief executive Stephen Hester says: “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.”