Brussels approves Royal Bank of Scotland revamp
The European Commission on Monday approved the restructuring of the state-owned Royal Bank of Scotland, rescued by Europe`s biggest-ever taxpayer bailout during the financial crisis.
Brussels: The European Commission on Monday approved the restructuring of the state-owned Royal Bank of Scotland, rescued by Europe`s biggest-ever taxpayer bailout during the financial crisis.
However, the EU`s top competition enforcer, Neelie Kroes, warned that if the bank failed to meet 2013 targets to restore healthy, natural order to its balance sheet, her successor Joaquin Almunia would not hesitate to take fresh action.
"The European Commission has approved under EU state aid rules the impaired asset relief measure and the restructuring plan of Royal Bank of Scotland," said a statement.
"The commission is satisfied that the measures are in line with its guidelines on impaired asset relief and on restructuring aid for banks ... As such, the state support for RBS is compatible" with European Union rules."
RBS was ravaged by the credit crunch and the takeover of Dutch giant ABN Amro at the top of the market in 2007.
Just in November, London agreed to pump an extra 25.5 billion pounds into RBS, which in turn said it would place 282 billion pounds of high-risk debts into the government`s toxic-asset insurance scheme.
That took the total government injection into RBS to between 60 billion and 100 billion pounds, "the largest amount of state aid ever received by any company in the EU`s history," according to competition spokesman Jonathan Todd.
As a result of the move, the state`s economic interest in RBS is climbing to 84 percent from 70 percent.
"In particular, the measures ensure a sustainable future for RBS without continued state support, foresee an appropriate participation of the bank in the costs of restructuring, and include safeguards to limit distortions of competition, notably by reducing the size of the bank," the EU statement added.
Todd said divestments included a large chunk of business equvalent to five percent of the British market for banking services, as well as "significant" insurance and commodity transaction operations.
"This case has been one of the most complex the commission has had to deal with during the financial crisis," said Kroes. "I am very pleased with the result.
The bank will "itself pay a sufficient share of the restructuring costs and distortions of competition will be limited by substantial divestments," she added.
RBS in November posted a net loss of 1.8 billion pounds (almost two billion euros or three billion dollars) for the third quarter of 2009, with bad debts standing at 3.279 billion pounds between July and September.
RBS chief executive Stephen Hester said then that the bank`s recovery would take a long time, closely mirroring the global economy`s return to strength after recession.
The parts being separated from the parent groups amount to about 10 percent of Britain`s troubled retail banking market.