What has Royal Bank of Scotland announced today?
There are two key aspects to today’s news. The bank has agreed terms with the government to take part in its asset protection scheme, which lets it pass most of the potential losses on its riskier assets on to the taxpayer. And it has raised up to £25.5bn in fresh funding from the UK taxpayer. How much of RBS’s assets is the taxpayer now liable for? The bank is placing assets valued at £325bn with the asset protection scheme. This means that RBS will be liable for the first £19.5bn of future losses on these assets, after which the government will cover 90% of future losses. RBS says it will cut its exposure to bad debts by £144bn, or 25%. What kind of assets are involved? There appears to be a wide range, including corporate and leveraged loans, commercial and residential property loans, and structured credit assets. The latter will include residential mortgage-backed securities and collateralised debt obligations – the assets banks happily traded before the credit crunch but which hav
