RBS suffers historic loss, gets record bailout

LONDON: Royal Bank of Scotland (RBS) announced UK���s biggest ever loss by any company, of ��24.1billion, even as it also announced that the UK government had agreed to a historical bailout package that could see the government adding up to ��25.5 billion to the bank as fresh capital.

At the same time, the public will insure up to ��325 billion of RBS��� toxic assets in the government���s newly announced asset restructuring scheme. Hectic parleys over the week led to the deal, in return for which RBS has agreed to lend up to ��25 billion in the local UK market, both in mortgages and loans.

RBS also announced a global restructuring, albeit without details, saying it will reduce its presence in 34 out of the 56 countries it is present in, mostly on the retail side. The market greeted the news with cheer, sending the bank���s stock up as it showed that the UK government���s attempts to force banks to start lending are having an effect.

Also, the fear that RBS, already 70% state-owned, would have to be fully nationalised has receded with this deal. It will see the UK government taking ��13 billion new preference shares, and committed to a further ��6 billion in mostly non-voting shares.

The news came at a time when there���s rising controversy over the ��650,000 annual pension due to former RBS chief Fred Goodwin, with UK���s finance minister Alistair Darling asking him to give up the pension, even as the bank is believed to be examining contractual agreements.

BANK DETOX REHAB

LEADING with RBS, the UK government announced its long discussed asset reconstruction scheme, which will see affected banks putting toxic assets in a ���ring-fenced��� bad bank. The asset reconstruction scheme envisages the UK government insuring up to ��500 billion in toxic assets.

Lloyds TSB is also expected to take part in the scheme, though others like Barclays and HSBC have not yet considered any government assistance. Any bank with assets over ��25 billion in ���eligible��� assets can join the scheme which is expected to run for five years. However, the terms of joining the scheme are likely to be negotiated individually with each bank depending on circumstances.

THE THIRD MAKEOVER

IN a shock move, UBS announced its third new chief executive in two years. The troubled Swiss Bank has taken Oswald Gurbel, former head of arch rival Credit Suisse as its new chief executive, replacing Marcel Rohner, who took over in 2007.

The move is seen as an attempt to regain credibility, because while Mr Rohner has not been directly involved in the row over UBS American private banking clients, he was in charge of private banking during the time. UBS is currently embroiled in a spiralling dispute with the US tax authorities over charges that its private bankers helped American clients evade US taxes. Mr Gruber, a career banker, quit Credit Suisse around two years ago.