independent

Friday 18 April 2014

Ulster Bank to escape axe in RBS restructure

Britain's chancellor George Osborne has highlighted the problems caused by Ulster Bank

ULSTER Bank is likely to remain open in Ireland after its parent company apparently decided against shutting down the Irish lender.

Royal Bank of Scotland, which is owned by the British government, is set to unveil a huge restructuring plan on Friday when it publishes its third-quarter results.

As part of the restructuring plan, RBS will create an internal "bad bank" where it will move as much as €47bn worth of so-called "toxic assets".

Much of those loans will come from Ulster Bank, which lent havily in Ireland during the boom.

Those loans will be run down more aggressively than the rest of the bank's performing loans.

The UK government has bailed out RBS to the tune of around €54bn since 2008 in an effort to stave off its collapse. About €16.9bn of those funds have been pumped into Ulster Bank.

Britain's chancellor George Osborne is under pressure to restructure RBS and get the bank back into private ownership, and as part of that effort has been pushing for the lender to be either broken up or dramatically restructured.

Mr Osborne has personally highlighted the problems caused by Ulster Bank, leading to repeated speculation that the division would be wound up and RBS would pull out of Ireland.

Now those fears have receded, with Ulster expected to continue operating in the Republic.

That will be a huge boost to the Irish Government as it tries to retain some semblance of competition here.

It will also be a boon to Irish borrowers, who have only three other lenders – AIB, Bank of Ireland and Permanent TSB – to choose from at present.

On Friday, ACC Bank became the latest to pull out of Ireland, following the likes of Bank of Scotland (Ireland). Danske Bank still has operations here but is shutting all its branches leading to speculation that it, too, will leave Ireland when it can.

The RBS decision will bring to a close a process that has lasted months, and could have huge implications for thousands of staff here.

Mr Osborne has described the RBS issue as "being at the top of his in-tray".

TOXIC

Advisers from Rothschild have been hired to prepare a report on RBS, while US asset manager BlackRock has been analysing its £54bn (€63bn) "non-core" portfolio of toxic assets.

The UK government is believed to favour the so-called "soft" restructuring of the bank rather than a full break-up, as a break-up would have to be approved by all shareholders, which is deemed unlikely.

Spokesmen for Ulster Bank and RBS declined to comment.

Irish Independent

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