Royal Bank of Scotland, which is 68% government-owned, has unveiled the largest annual loss in UK corporate history totalling £24.1 billion.
The bank had previously warned that its losses could be as much as £28 billion, as a result of the housing market downturn, credit crisis and stockmarket choas. It also found itself over-exposed to toxic US debt, forcing the government to inject the bank with a £20 billion bail-out last November.
Alongside its results, RBS has confirmed that it is to take part in the government’s second bail-out plan, with £325 billion of its assets ‘insured’ under the Treasury’s Asset Protection Scheme. The scheme aims to boost lending by banks by shifting their losses onto the Treasury – and therefore the taxpayer.
RBS says it will bear its first loss – of £19.5 billion – with any subsequent losses shouldered 90% by the Treasury and 10% by the bank itself.
In return, RBS says it will increase its lending to homeowners and businesses who meet its credit criteria by £25 billion over the next 12 months. It is currently anticipated that this will be split £9 billion to mortgage borrowers and the remaining £16 billion to businesses. An additional £25 billion will be introduced in 2010.
Stephen Hester, chief executive of RBS, says: "Participation in this scheme would assist us in reducing risk for shareholders while providing greater support for UK customers via increased lending. It would provide increased certainty to the market by limiting potential losses on a significant proportion of our balance sheet."