The Treasury has today published its final agreement with the Royal Bank of Scotland (RBS) on the bank's participation in the Asset Protection Scheme (APS), along with further detail of the scheme's operation and the assets it covers.
The Treasury has also announced the launch of the Asset Protection Agency that will administer the scheme in order to protect the taxpayer's interest. Financial Services Secretary to the Treasury Paul Myners said:
"The Government's action to stabilise the financial system has succeeded in protecting the savings of British families. We have strived throughout our interventions to ensure maximum value for the taxpayer, charging commercial rates for our support for the banks and making supported firms pick up the tab for extra operating costs.
"The agreement we have reached with RBS follows this approach. This final agreement sees a much-improved position for the taxpayer compared to the initial deal announced in February. RBS will bear a much greater share of the burden, with the first loss increasing by £18bn. The bank will also pay the full operational costs of the Asset Protection Agency.
"Together with the exit of Lloyds from the APS, taxpayer exposure to bank losses has been markedly reduced. With this agreement entering into force with State Aid approval expected soon, our focus can turn to reforming the financial system for the future, both with greater competition on the High Street, and stronger global and domestic regulation."
The Government announced final agreements with Lloyds and RBS on 3 November. Lloyds has proceeded with plans to raise capital on the markets and RBS signed its agreement on participation in the APS on 26 November. Discretionary cash bonuses for staff earning above £39,000 have been banned at both banks for the 2009 performance year and binding lending agreements have been implemented as conditions of Government support.
The European Commission has also required both banks to make significant divestments including hundreds of branches throughout the country to encourage greater competition and choice for consumers.