RBS in talks to leave asset protection programme

24 January 2011

The Royal Bank of Scotland (RBS) is in talks with the UK Treasury over an early departure from a government-backed insurance program for its riskier assets.

RBS joined the Asset Protection Scheme (APS) in 2009 as part of a strategy to insure it from future credit losses on some of its asset portfolios.

Reports suggest that the bank, which is 83 per cent owned by the government, is now looking to leave the scheme at some stage this year.

Analysts at JPMorgan said: “In terms of what it was meant to do the scheme has been successful - whilst the company may not draw down on the insurance, we think that it has played a significant role in adding confidence to the sector over the past two years. At this stage however it appears redundant.”

The APS was initially set up to protect more than £280 billion worth of assets belonging to the bank with RBS having to absorb £60 billion of any losses on assets insured by the scheme.

RBS and Lloyds Banking Group both joined the scheme in 2009 with the latter paying £2.5 billion on its exit.

By Jim Ottewill

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