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Volume 551: debated on Wednesday 17 October 2012

Today, the Government announce the exit on 18 October of the Royal Bank of Scotland (RBS) from the asset protection scheme (APS).

The APS, announced in January 2009, was created to enable the UK Government to provide participating institutions with protection against future credit losses on defined portfolios of assets in exchange for a fee.

The scheme provided support to RBS during and in the immediate aftermath of the financial crisis. However, as the bank has continued to stabilise and manage down non-performing assets, the APS no longer provides material benefit in strengthening RBS’s financial position.

Today, having reached the minimum fee of £2.5 billion and with no payout under the scheme deemed likely, the Government have agreed with RBS to allow its exit.

The Government launched the Asset Protection Agency in December 2009 to manage the APS on behalf of Her Majesty’s Treasury. Now that RBS has exited the APS, the agency has fulfilled its objectives and will aim to close on 31 October 2012.

This represents an important milestone on RBS’s path of recovery and towards a return to the private sector.

It also removes a substantial contingent liability from the Government’s balance sheet. At its peak, the APS pledged £400 billion of taxpayer support to the UK banking sector, and by exiting the APS this figure is reduced from approximately £40 billion to zero. During this Parliament the taxpayer guarantee to the sector has fallen by over £450 billion, a drop of almost 95%.