UK threatens to reduce guarantee on RBS's structured credit book

Royal Bank of Scotland is in dispute with the UK treasury over some £2 billion ($3.5 billion) of structured credit assets, it has emerged. According to the annual report of the UK Asset Protection Agency, which provides a UK government guarantee on RBS’s bad assets, the agency and RBS cannot agree on whether £2.3 billion of positions are eligible for the guarantee. The government body does not give details of what these assets are, but says that they should not be covered by the guarantee for technical reasons. The agency warns that if talks to resolve the issue are not resolved, it will withdraw its guarantee from these assets.

The disputed assets represent a small proportion of the £183 billion in par terms of RBS assets that are covered by the scheme. Some £6 billion consists of directly held CDOs, and there are other structured credit exposures in the £9 billion book of exposures hedged by monolines.