Banking Reform

Tue, Nov 17, 2009

business & economy

3 November 2009


We are making the banks safer, stronger and better for the consumer.


The break-up of the rescued banks will create three new banks.  It’s the biggest shake up of the high street for a generation increasing competition and benefiting consumers with better rates and services.


The situation has improved largely due to Government action.  We are now announcing the outcome of the negotiations on the Asset Protection Scheme (APS) and the improved structuring of these deals:


o       RBS will participate in the APS under revised terms that improve incentives and deliver better risk-sharing with the private sector.

o       Lloyds will not participate in the APS and instead will raise additional capital predominantly from the private sector, as well as paying a fee to the taxpayer for the implicit protection provided to date. This will reduce the risk borne by the taxpayer, improving value for money; [details of both below]


This is a better deal, reducing the total assets protected by the taxpayer under this scheme by over £300bn


The likely costs to the taxpayer and the risks on the impact on the public finances have been reduced.  Both banks will still be required to meet tough conditions on pay and lending.


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