Banks in the UK and Ireland took another step this week on the difficult road to recovery from the 2008 financial crisis.
In the UK, RBS said it felt secure enough to leave the government’s Asset Protection Scheme (APS), while in Ireland, Permanent TSB is on the brink of outsourcing the management of its entire commercial loan book to specialist Certus.
RBS’s decision to leave the APS on 18 October, three years after it entered the insurance scheme, comes after it spent £2.5bn for its participation without making a single claim.
The APS was the mechanism through which the Treasury provided backstop credit insurance for a portfolio of RBS assets and derivative exposures.
The benefit of the APS, said the bank, was that it allowed RBS to transform a balance sheet “that had become dangerously large and unstable into one that is more conservative, resilient and sustainable”. During the time RBS was in the scheme, the value of assets insured fell from £282bn to around £105bn, a drop of 63%. The value of assets directly dependent on property fell over the same period from £40bn to £20bn, said the bank.
Stephen Hester, RBS group chief executive, said: “We all want a system in which banks will never again need to seek credit support from government in a financial crisis.”
Meanwhile, in Ireland, sources within Permanent TSB confirmed that the bank would be appointing banking services firm Certus to run its commercial loan book “within weeks”. Permanent TSB is Ireland’s largest provider of residential mortgages, but it also has £2bn of commercial loans which, it says, it has less expertise in managing.
Certus, which was set up by former managers of the Bank of Scotland (Ireland), has managed the £20bn commercial loans of Lloyds Banking Group in Ireland since 2010. It also recently won a contract from Irish bank Resolution to help it to collect debts on its €1.8bn residential mortgage book.
The Irish state now owns 99.5% of Permanent TSB as a result of a €4bn bailout. One term of that bailout was that Permanent should concentrate on its retail banking business. rather than on its commercial loan book.
