RBS has to sell to join APS scheme

2nd Nov 2009 07:05

Royal Bank of Scotland has confirmed it may have to sell significant chunks of its business as a result of its participation in the government's toxic loan insurance scheme (APS).The bank confirmed it is close to agreement about the terms of it joining the asset protection scheme, but added it will have to divest some of its subsidiaries to meet European rules on state-aid.The 70% taxpayer-owned bank said "It expects the agreement on the APS to reflect market improvements since February and RBS's ongoing recovery whilst giving protection against future potential stressed case losses".Negotiations between the European Commission and UK government are in their final stages and will include "some divestments not initially contemplated", the statement added.It remains RBS's goal that any required divestments do not threaten its recovery plan, which is already underway, it said. Full details will be released not later than Friday when its third quarter results are also published, RBS added.Stories over the weekend suggested that the government's stake in RBS could rise to as much as 84% from the current 70% as part of a deal that will see £270bn of toxic loans transferred into the state-backed insurance scheme.RBS is also fighting to hang onto its US-based bank Citizens Financial against EU pressure to divest it, according to other reports, but it could be forced to sell its insurance arms Churchill and Direct Line despite new chief executive Stephen Hester reversing previous attempts to divest the businesses.Over the weekend, chancellor Alistair Darling confirmed that Lloyds, RBS and Northern Rock will be broken up and that three new High Street banks in the UK would open up in the UK over the next three to four years as a result.