The Government is today making two important announcements to further enhance financial stability and support increased lending to homeowners and businesses. Firstly, 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. Secondly, the Treasury is announcing an agreement in principle with the Royal Bank of Scotland (RBS) to participate in the Scheme and other financial support to meet its objectives of economic and financial stability
Asset Protection
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.
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