What's in RBS's bad bank ?

RBS branch sign

Royal Bank of Scotland's new capital resolution division (RCR) will contain £38bn of the bailed-out bank's most troublesome loans.

The bank already had a "non-core" division, which Stephen Hester created on joining RBS five years ago, when the bank was on the brink of collapse. At that time it had £258bn of unwanted businesses and assets, which had shrunk to £35bn by the time Hester left in September. These businesses included substantial operations such as its commodity trading business, plane leasing and pub chains.

Some £14.8bn of those existing non-core assets will go into the RCR together with another £23.5bn of loans that currently look as if they will not be repaid.

That £23.5bn is largely commercial property loans and split between four of the existing divisions. UK corporate, which lends to big business, will put £5.5bn into the new division, while Ulster bank will put in £4.1bn. The investment banking arm has £2.6bn of troubled positions that will go into the RCR, while £2.6bn will come from international markets.

The addition of the new legacy positions mean that £9bn loans from Ulster bank are now included in the division.

The RCR will hold 5% of the bank's total assets but, reflecting how risky they are, they account for 20% of the bank's capital.

As a result some £11bn of capital should be released to the cleaned-up operations of RBS.

Powered by Guardian.co.ukThis article was written by Jill Treanor, for theguardian.com on Friday 1st November 2013 11.58 Europe/London

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image: © Elliot Brown

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