The Treasury has today announced new measures to shore up UK banks by insuring their toxic assets against future losses.
Reports suggest that as much as £600billion will be insured by the Asset Protection Scheme, £325billion of which will come from RBS
, while it is expected the rest will come from Lloyds Banking Group following its results announcement tomorrow.
According to the Treasury, the scheme "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."
By participating in the scheme, both banks will see 90 per cent of the value insured covered, in return for a fee. Following the RBS results announcement this morning, it has emerged that RBS will pay a fee of £6.5billion.
In addition, RBS has agreed to increase its mortgage
lending and loans
to small businesses by £25billion in 2009 – a move which is much needed as mortgage lending continues to restrict the UK economy, despite several Government initiatives.
Nevertheless, despite these latest measures, reports have emerged today that Financial Services Authority chairman Lord Turner hinted at the need for further action at the Treasury Select Committee yesterday.
Although the terms of Lloyds' participation in the scheme have not yet been finalised, an announcement is expected from the newly formed group tomorrow.
© Fair Investment