Royal Bank of Scotland Group agreed to exit the UK's Asset Protection Scheme (APS) after paying £2.5 billion to the government to insure its most risky assets.
Britain's biggest taxpayer-owned bank was in 2009 the only lender to join the scheme, which covered potential losses on £282 billion of loans and derivatives.
RBS never had to draw on the policy, for which it paid the government a fee, and has reduced the amount of loans protected to £105 billion, the Edinburgh-based bank said in a statement today.
Leaving the APS removes another obstacle to the 81 per cent government-owned lender's return to private ownership.
Chief executive officer Stephen Hester has cut assets by more than £800 billion pounds, eliminated about 36,000 jobs and scaled back RBS's securities and Irish units since he took over from Fred Goodwin when the bank was rescued in 2008.
The program "played an important role in stabilizing market perceptions of RBS after the impact of the financial crisis became clearer and the bank's share price fell to a low of 10 pence in February 2009," RBS said today in the statement.
"This gave time for the bank's new board and management to put its recovery plan into effect." The bank has approval from the Financial Services Authority for its exit, it said.
RBS rose as much as 6 pence, or 2.1 per cent, to 286 pence in London and traded at 285.1 pence at 8.10am, valuing the bank at £31.8 billion.
Chancellor of the Exchequer George Osborne said the decision is a step in the right direction toward getting the bank back into private ownership.
"During this Parliament the support provided by the taxpayer to the banking sector in the form of guarantees has fallen by over £450 billion, a drop of almost 95 per cent," Mr Osborne said in a statement released by the Treasury in London today.
"The government's strategy remains to return RBS to the private sector when it is value for the taxpayer to do so. Today is a step in that direction."
Bloomberg
