RBS to put problem loans in internal bad bank
Nov 01 2013 , London
The government, which owns 81 percent of RBS, wants the bank to lend more to small businesses and said the new structure should help that.
RBS said on Friday it would put 38 billion pounds of loans into a new 'capital resolution division' next year, which would free up 10-11 billion pounds of capital.
The bank said Britain's financial watchdog has made it clear in recent months it expects banks to hold more capital, making it more important to sell or run down its bad assets.
The faster run-down of assets will accelerate and increase losses on the loans, and the bank expects to take an extra impairment charge of between 4 billion and 4.5 billion pounds in the current quarter, it said.
"Under this new direction RBS will deal decisively with the problems of the past by separating out the good from the bad, and putting the bad loans in a bad bank," British finance minister George Osborne said.
RBS said it now plans to hold a core capital ratio of about 11 percent by the end of 2015 and 12 percent a year later, which is 3 percentage points above its current position.
It will accelerate the divestment of Citizens with a partial IPO planned for next year.
RBS said it was co-operating with various governments and regulators investigating foreign exchange trading activities by several banks and is reviewing communications and procedures "relating to certain currency exchange benchmark rates as well as foreign exchange trading activity".