Britain's Royal Bank of Scotland has decided to create an internal bad bank facility with a view to managing most of its risky assets separately. The UK government backed the intention of the taxpayer-owned lender.
RBS reported Friday the planned internal bad bank would separately manage 38 billion pounds ($61 billion, 44.3 billion euros) of its riskiest assets to clean up its balance sheets in the aftermath of the financial crisis.
The government in London had originally looked into the possibility of creating a separate external entity to absorb the toxic assets, but agreed that spinning it off completely would probably do more harm than good by distracting management at a crucial time of restructuring and reorientation.
The internal bad bank is to dispose of 55 percent to 70 percent of the non-performing assets by the end of 2016.
Privatization a long way off
"While there is inevitable uncertainty associated with running down such assets, we have a clear aspiration to remove them from the balance sheets in three years," RBS Chief Executive Ross McEwan said in a statement.
RBS was rescued by the government in 2008 through a 45-billion-pound bailout scheme, leaving the lender 81-percent taxpayer-owned.
McEwan had launched a complete review of the bank's businesses, promising he would report back in February. He said the sale of its US banking subsidiary Citizens needed to be accelerated.
The timeframe for winding down toxic assets means it is unlikely the government will be able to sell its stake before the next election in 2015. Returning the lender to private ownership would have meant a significant victory for the conservative-led coalition.
hg/tj (dpa, AP)