Royal Bank of Scotland Group plc has confirmed that it has reached agreement with the HM Treasury to exit the UK Government’s Asset Protection Scheme, effective tomorrow, 18 October 2012.
The exit comes at the earliest date consistent with the minimum contractual APS fee. RBS will have paid £2.5 billion for its participation in the APS, without having made a claim, in addition to around £1.5 billion it paid to HM Treasury for liquidity support received during the financial crisis.
The APS is the mechanism through which HM Treasury provided backstop credit insurance for a portfolio of RBS assets and derivative exposures, in support of the new Board’s turnaround plans for the Bank. It helped stabilise market perceptions of RBS after the impact of the financial crisis became clearer and the Bank’s share price fell to a low of 10 pence in February 2009. This gave time for the Bank’s new Board and management to put its recovery plan into effect.
RBS says its exit from the APS demonstrates the progress it has made in transforming a balance sheet that had become dangerously large and unstable into one that is more conservative, resilient, and sustainable. The Government agreed to insure £282 billion of assets when RBS formally entered APS in November 2009. Those assets have since fallen to around £105 billion, a reduction of 63%.
FSA approval has also been received for the exit of APS. RBS continues to discuss with the FSA its capital plans and actions for ensuring a balanced transition to Basel III.
Stephen Hester, RBS group chief executive, 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.”