HM Treasury

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Asset Protection Scheme

27 February 2009

The Treasury is announcing the details of the Asset Protection Scheme, which aims to remove continuing uncertainty about the value of banks’ past investments, cleaning up banks’ balance sheets and providing them with greater confidence to rebuild and restructure their operations and increase lending in the economy

The Government announced its intention to introduce the Scheme as part of a comprehensive package of measures to support lending announced on 19 January. These measures are designed to reinforce the stability of the financial system following the intensification of the global downturn and therefore to increase the capacity of banks to lend. From the outset of the global financial crisis, the Government has stressed the central importance of full and accurate disclosure by banks about the value of their assets as the key to restoring confidence and trust.

The Asset Protection Scheme will play a central role in restoring confidence in the UK’s biggest banks by providing protection against future losses on their riskiest assets. Banks will receive protection for a proportion of their balance sheets so that the healthier core of their commercial business can continue to lend to creditworthy businesses and households.

In return for access to the Scheme, banks will be required to pay a fee and enter into legally binding agreements to increase the amount of lending they provide to homeowners and businesses. The Government will report to Parliament annually on the delivery of the agreements.

In support of this announcement the Treasury also publishes:

The FSA is today publishing a statement explaining the regulatory and capital impact of the Asset Protection Scheme.  It is also publishing today a draft Code of Practice on remuneration policies.  Both can be obtained from the FSA at http://www.fsa.gov.uk/

UK Asset Protection Scheme

UK Asset Protection Scheme is available in Adobe Acrobat Portable Document Format (PDF). If you do not have Adobe Acrobat installed on your computer you can download the software free of charge from the Adobe website . For alternative ways to read PDF documents and further information on website accessibility visit the HM Treasury accessibility page .

Agreement in principle with the Royal Bank of Scotland

Following discussions with RBS’ new management team, the Government is today announcing an agreement in principle with RBS covering participation in the Scheme and a capital injection.

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