RBS withdraws from APS

A woman walks past an RBS branch RBS will save large amounts of fees by withdrawing from the scheme

Royal Bank of Scotland has moved a step nearer financial rehabilitation and eventual privatisation by withdrawing from the Asset Protection Scheme, an insurance scheme created by the government in 2009 by which losses on RBS's worst loans and investments would have been taken by taxpayers.

In practice, RBS has been able to sell or offload the £280bn of loans and investments put into the scheme without having to transfer any losses to taxpayers. And it has paid £2.5bn for the protection.

But this does not mean the scheme represented bad value for RBS and its owners. Without it, RBS might have felt under pressure to clean itself up faster, which meant it might well have sold its bad loans far cheaper - and actually incurred even bigger losses than it has suffered in recent years.

By withdrawing from the scheme, with the agreement of the Financial Services Authority and the Treasury, RBS will be saving itself £500m a year in fees.

For the Treasury, the end of the APS can be seen as symbolising almost the end of one important form of support for banks that was put in place after the crisis of 2007-8: in March 2010, the Treasury had provided £486bn of insurance, loans and guarantees to the UK's banks (and at the peak in 2009, all financial support by British taxpayers for the banks was £1.2 trillion); as of today, that has fallen to £31bn.

Robert Peston

However, if the UK's banks are no longer wholly dependent on taxpayer support to prevent them going bust, they are receiving significant financial help from the Bank of England - in the form of the Funding for Lending Scheme and the Extended Collateral Term Repo.

The purpose of the Bank of England's newer support is less to keep the banks alive, and more to provide them with funds so that they can provide the credit badly needed by businesses and households, and reinforce the UK's sporadic and anaemic economic recovery.

Robert Peston Article written by Robert Peston Robert Peston Economics editor

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  • rate this

    Comment number 6.

    If RBS/Nat West is saving £500 million a year now, maybe it would like to invest in updating and upgrading its calamitous IT systems to make them fit for purpose for both now and the future.

    Especially as It is likely to be increasingly competing with 'new boys' on the block who will not have IT systems bogged down with 'legacy' issues.

  • rate this

    Comment number 3.

    Pity We All cant get such great insurance Cover offered with this deal

    4 years to pay the premiums of a couple of billion to insurance infinitum

    What a bad deal for tax payer If tax payer had pay out. Although We have All paid in other ways by QE

  • rate this

    Comment number 31.

    Perhaps they can ask Goldfeinfilled Sacks for a handout too, now the squid is back to bumper profits (AND BONUSES) on the back of QE (read handouts for financial institutions). Still nobody in jail for the biggest fraud in history and business as usual transferring wealth from middle and lower income to rich.. it STILL smells squiddy, four years later... change please, who's got the round objects?

  • rate this

    Comment number 48.

    "the Extended Collateral Term Repo" cannot be described as "significant help" this month as the take-up was zero........

    After the first month, where we have to wonder if there was official pressure to take funds, the take-up has declined quickly. So not much support for credit provision there!

  • rate this

    Comment number 25.

    STILL no laws to control the financial sector, just guidelines and regulations plus, a whitewash pending. Can you imagine the levels of crime in the UK if there were no laws, just guidelines and regulations. Fraud, bribery, corruption, interest rate rigging, money laundering all OK because the sector involved is a lawless free for all where the victims are portrayed as 'customers'.


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