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Sunday, February 22, 2009

Report: RBS to Split into Good Bank / Bad Bank

by Calculated Risk on 2/22/2009 09:54:00 AM

From The Times: Radical revamp splits RBS in two

The Royal Bank of Scotland (RBS) is to be split into a “good bank” and “bad bank” in a dramatic rescue restructuring in which assets worth several hundred billion pounds will be put up for sale.

Stephen Hester, RBS chief executive, will outline the plans this week as he unveils Britain’s biggest-ever corporate loss of up to £28 billion. He will cut costs by more than £1 billion a year, a move expected to lead to the loss of about 20,000 jobs ...

RBS will also place at least of toxic assets into the government’s asset-protection scheme, a controversial insurance scheme designed to protect banks against further losses.
This week’s results are expected to confirm a loss of between £7 billion and £8 billion, and a further write-down of up to £20 billion on its acquisition of the Dutch bank ABN Amro.
These losses and job cuts have been reported earlier. The "bad bank" insurance scheme is similar to the insurance plan the U.S. provided for Citigroup and Bank of America - although in the U.S. the banks didn't split in two.

Originally RBS planned on putting £50 billion to £100 billion of loans into the bank-insurance scheme - now the number has grown to "at least £200 billion". RBS will take the first 10% of losses on the loans and the U.K. taxpayers are on the hook for any additional losses.