RBS exposed to reckless foreign loans

By SAM FLEMING FOR MAILONLINE
Updated:

The British taxpayer is insuring almost £168billion of foreign loans and investments accumulated by Royal Bank of Scotland during its foolhardy dash for growth.

Nearly 60 per cent of the toxic loans and investments injected into the Government Asset Protection Scheme ( GAPS) originated overseas, according to Treasury documents.

In addition, taxpayers are backing nearly half of RBS's UK small business banking loan book and 56 per cent of its British property finance assets - suggesting a huge proportion of the Edinburgh firm's domestic assets are also at risk of going sour.

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The report exposes the extraordinary recklessness of RBS's disgraced management, as bosses hoovered up vast portfolios of loans and investments at home and overseas with little regard to the dangers of default.

Under the GAPS, taxpayers are now backing £281.9billion of assets as part of a deal to prop up RBS's finances.

The public sector is liable for 90 per cent of the losses on the loans and investments, after RBS has incurred an initial £60billion hit.

Yesterday's report reveals for the first time the gristly complexion of RBS's toxic asset portfolios. Of the £281.9billion of RBS assets sheltered under the GAPS, only £114.5billion originated in Britain. The rest of the loans and investments are in foreign jurisdictions such as the US, Germany and the Far East.

A Treasury spokesman said: 'Among the many poor decisions made by the former management of RBS were investments in overseas assets and acquisitions of foreign firms that they did not fully understand.

'Protecting UK depositors with RBS means that protection has to be offered across all troubled assets held by the bank.

'Under the improved terms, we expect no losses for the taxpayer.'

The documents also show that the general public is now insuring £3.3billion of overdrafts owed by ordinary UK customers. That is nearly a quarter of the total, or 3.2million accounts.

Such is the Treasury's mistrust of state-controlled RBS, that it has reserved the power to step in and order new managers to oversee the loans, the documents reveal.

They also show that RBS is liable for £45million of advisory fees incurred by the Treasury in the bailout. The liability for the Lloyds rescue is £26million.

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