RBS to set up 'bad bank' for $50b toxic assets
The taxpayer-backed lender is to say that a new, separately managed bad bank will be established to deal with the legacy of its toxic assets – the least disruptive of three break-up options being considered for the bailed-out bank.
Chancellor George Osborne ordered a review of the taxpayer-backed bank after a parliamentary commission recommended the government consider splitting up RBS.
Mr Osborne is expected to back the bad bank plan after being presented last month with a Rothschild report on the future structure of the lender.
RBS already holds £54 billion of toxic assets in its existing “non-core” division, but the new bad bank unit could contain as little as £35 billion of legacy assets.
Among the options understood to have been turned down was a more radical break-up that would have involved setting up a new state-backed body into which RBS could have put tens of billions of pounds of its bad assets.
The bad bank announcement will come alongside the release of RBS’ third-quarter financial results, which are expected to show it made a pre-tax profit of £400 million, reversing a loss in the same period last year of £1.2 billion.
The return to profit is likely to increase the focus on RBS’s inability to pay dividends, and the bank is expected to confirm it is in talks to pay back the £1.5 billion so-called ‘‘dividend access share’’ that prevents it from paying dividends.
The results will be the first overseen by RBS’s new chief executive, Ross McEwan. The New Zealander, who was a senior executive at the Commonwealth Bank, wants to launch his own strategic review.
Among the other issues likely to be under the spotlight will be further mis-selling provisions as well as investigations into potential wrongdoing by RBS staff. RBS has already set aside billions of pounds for payment protection insurance and interest rate swap mis-selling, but could announce further charges.
The bank will also be expected to give an update on an investigation into manipulation of the foreign exchange market after admitting it was co-operating with an international inquiry into the allegations.
RBS has already settled with the US and British authorities over its role in Libor-rigging. However, the bank this week was named along with eight others in an $US800 million ($844 million) lawsuit filed in New York by US mortgage lender Fannie Mae.
Fannie Mae is claiming that the banks manipulated borrowing rates, costing it hundreds of millions of dollars in losses on interest rate swaps taken out to hedge its exposure to movements in rates.
Meanwhile, RBS has suspended two traders in connection with a worldwide probe into the possible manipulation of the $US5 trillion-a-day foreign exchange market, the Financial Times claimed.
Frequently Asked Questions about this Article…
A 'bad bank' is a separate entity created to hold and manage non-performing or toxic assets. RBS is setting up a bad bank to manage over £30 billion ($50 billion) of toxic assets, following a review ordered by the British Treasury. This move is intended to be the least disruptive option for dealing with these legacy assets.
A 'bad bank' is a separate entity created to hold and manage toxic assets, which are difficult to sell or have lost value. RBS is setting up a bad bank to manage over £30 billion ($50 billion) of its toxic assets, following a review ordered by the British Treasury. This move aims to address the legacy of these assets in a way that is least disruptive to the bank's operations.
The creation of a bad bank is expected to help RBS manage its toxic assets more effectively, potentially improving its financial performance. The bank is already showing signs of recovery, with a projected pre-tax profit of £400 million in the third quarter, reversing a loss from the previous year.
The creation of a bad bank is expected to help RBS manage its toxic assets more effectively, potentially improving its financial performance. The announcement coincides with RBS's third-quarter financial results, which are expected to show a pre-tax profit of £400 million, reversing a loss from the previous year.
RBS's ability to pay dividends is currently restricted by a £1.5 billion 'dividend access share.' The bank is in talks to repay this amount, which would enable it to resume dividend payments in the future.
RBS's return to profit increases the focus on its inability to pay dividends. The bank is in talks to repay a £1.5 billion 'dividend access share,' which currently prevents it from paying dividends. The creation of a bad bank could potentially improve RBS's financial health, making dividend payments more feasible in the future.
The changes at RBS, including the setup of the bad bank, are being overseen by the new chief executive, Ross McEwan. He is also planning to launch his own strategic review of the bank's operations.
The changes at RBS, including the setup of the bad bank, are being overseen by the new chief executive, Ross McEwan. He is expected to launch his own strategic review to further address the bank's challenges and opportunities.
Besides managing toxic assets, RBS is dealing with issues such as mis-selling provisions and investigations into potential wrongdoing by its staff. The bank has set aside funds for payment protection insurance and interest rate swap mis-selling and is involved in an international inquiry into foreign exchange market manipulation.
RBS is dealing with several issues, including further mis-selling provisions and investigations into potential wrongdoing by its staff. The bank has set aside billions for payment protection insurance and interest rate swap mis-selling and is also involved in a worldwide probe into foreign exchange market manipulation.
RBS is cooperating with an international inquiry into allegations of foreign exchange market manipulation. The bank has already suspended two traders in connection with this worldwide probe.
RBS is cooperating with an international inquiry into allegations of foreign exchange market manipulation. The bank has suspended two traders in connection with this worldwide probe, highlighting its involvement in the investigation.
RBS is facing a lawsuit filed by US mortgage lender Fannie Mae, which claims that the bank, along with others, manipulated borrowing rates, resulting in significant losses on interest rate swaps. This lawsuit is part of ongoing legal challenges related to rate manipulation.
RBS has already settled with US and British authorities over its role in Libor-rigging. This settlement is significant as it reflects the bank's past involvement in manipulating borrowing rates, which has led to legal and financial repercussions.
RBS's return to a pre-tax profit of £400 million in the third quarter is significant as it marks a reversal from a £1.2 billion loss in the same period last year. This improvement is likely to increase focus on the bank's future strategies and its ability to resume dividend payments.
RBS, along with eight other banks, is named in an $800 million lawsuit filed by US mortgage lender Fannie Mae. The lawsuit claims that the banks manipulated borrowing rates, resulting in significant losses for Fannie Mae on interest rate swaps used to hedge against rate movements.
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