RBS To Offer New Loans Again In Exchange For More Government Money
The Royal Bank of Scotland (RBS) has announced that it is to follow the move made by Northern Rock earlier this month and start offering new loans to customers once more.
The news follows the announcement that the bank has made record losses over the past twelve months and intends to take advantage of the Government’s Asset Protection Scheme. The Royal Bank of Scotland is already 70 per cent nationalised, due to previous Government bail outs and this latest move will see the British public owning an even bigger share of the loss making organisation.
In order to enter the scheme, RBS will have to pay a fee of £6.5 billion to the treasury, for a participation in the scheme with assets of £325 billion. In exchange for this, the Government will buy “toxic” loans from the bank, that is, those bad credit loans which are in severe arrears or default and loans which are considered to be of high risk to the lender, reducing the bank’s liquidity and therefore ability to offer new loans.
As a large part of the deal with the Government, the Royal Bank of Scotland has been forced to commit to providing an additional £25 billion in new loans over the course of this year. This amount will be split into £9 billion towards new homeowner loans for house purchase and a further £16 billion will be made available for new business loans, in order to help support businesses through the current recession.
Hopefully these new homeowner loans will be realistically priced with sensible loan to value ratios to help first time buyers onto the housing market and although this may be a PR exercise for the Government for political gain, extra lending from banks has to be a step in the right direction for those looking to buy a house, but as with Northern Rock it appears to be the UK taxpayer who once again is picking up the bill for irresponsible lending in the past.
