HM Treasury announces publication of RBS Bad Bank Review

Banking and financial services company RBS Group is determined to become an asset, rather than a burden, to the UK economy, according to a statement released from HM Treasury, in which it announced that the UK government has published a review of the Edinburgh based firm, entitled ‘RBS and the case for a bad bank: the Government’s Review’.

The review was announced by Chancellor George Osborne in June this year and was conducted by the Treasury with expert help from Blackrock Solutions and Rothschild. ‘RBS and the case for a bad bank: the Government’s Review’ advises that RBS should use its skills in effectively managing down its non-core assets, in combination with the RBS plan for setting up an internal bad bank, in order to offer the most efficient route to resolve identified assets. This new strategy should address many of the bank’s challenges and investor concerns, which over time would be reflected in an improved valuation and increase the prospect of an earlier return of RBS ownership to the private sector, according to the review.

RBS also released its latest set of results today and announced that the bank is headed in a new direction, which it expects to result in being of benefit to the UK economy, instead of a liability. The company said that a bad bank will be created to separate and wind down its poorly-performing and high-risk assets and stated that it aims remove between 55% and 70% of these assets over the next two years. This will be an ‘internal’ bad bank funded by RBS itself, rather than being publicly funded.

According to HM Treasury, the Bank of England has confirmed that the taxpayers’ contingent exposure to the banking system has been reduced by a further GBP8bn with the removal of the Contingent Capital Facility one year early.The Treasury and RBS are now in advanced negotiations with the European Commission as to when the Dividend Access Share (DAS) is retired, which should also make RBS shares more attractive to external investors.

The Chancellor stated:

“The new direction for RBS is supported wholeheartedly by the management and Board of RBS, the Bank of England, the Government and UK Financial Investments (UKFI). The authorities look forward to supporting Ross McEwan and his team in implementing this plan.

“It means less exposure for the British taxpayer and more help for the British economy. That is why it’s good for Britain.”