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Lloyds And Rbs Escaped £3.9Bn Toxic Fees

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http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8215167/Lloyds-and-RBS-escaped-3.9bn-toxic-fees.html

In a report on the giant taxpayer-backed insurance scheme, which was set up in 2009 to prevent the lenders' collapse, the National Audit Office (NAO) argued that Lloyds should have paid up to £4.5bn for temporary use of the insurance. Ultimately, Lloyds paid £2.5bn to pull out of the APS in October last year – seven months after placing £260bn of bad assets in a provisional version.

RBS placed £282bn in the fully-formed APS in November 2009, when the minimum exit fee was also set at £2.5bn. The Government also injected another £25.5bn into the bank, lifting the taxpayer's stake to 83pc. The NAO said an exit fee of £4.4bn "could have been justified".

Under the terms of the deal struck with RBS, the bank will bear the first £60bn of losses and 10pc of any subsequent hit. As of September, losses on APS assets stood at £37bn. The NAO found that the taxpayer will bear a cost, after fees, if losses on the £282bn portfolio top £76bn.

Once losses reach £73bn, the report also found, "the financial incentive on RBS to restrict further losses would weaken significantly". A severe stress test carried out by the Treasury found that losses could hit £98bn, but that was an "unlikely outcome".

The Asset Protection Agency, which is responsible for ensuring RBS runs the APS assets in the taxpayers' best interests, has estimated "there may be a temporary breach of the first loss by the end of 2011, but subsequent recoveries are expected to keep the lifetime expected net loss at £57bn", the NAO pointed out.

Is it fair to assume that losses are likely to exceed £98bn as the Treasury deem it unlikely? I wonder what criteria where put on the Irish assets?

Thank god the recovery has been factored in to the predicted losses. I'm feeling confident now.

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http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/8215167/Lloyds-and-RBS-escaped-3.9bn-toxic-fees.html

Is it fair to assume that losses are likely to exceed £98bn as the Treasury deem it unlikely? I wonder what criteria where put on the Irish assets?

Thank god the recovery has been factored in to the predicted losses. I'm feeling confident now.

A standard Excess Of Loss Cover, a bit shat in that it only seems to have one layer, it should have been split into several layers with the insured taking a larger cession up the layers, the rate on line of around 1% is comical because the risk pricing is probably based on default probabilities over the last 10 years, theres no way it would be privately placed at anywhere near that rate.

Id expect the tax payer to get massacred on this, it is comedy pricing

Edited by Tamara De Lempicka

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quite clearly,I know a lot less than you of the insurance world.Having used an empty fag packet,I came to the same conclusion before I read your post.

I'm stunned that we have such a stupid govt,this one is as bad as the last when it comes to squandering taxpayers cash.

Erm, that's a very big claim! Is there anything significant in this story attributable to this government as opposed to its predecessor?

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  • 309 Brexit, House prices and Summer 2020

    1. 1. Including the effects Brexit, where do you think average UK house prices will be relative to now in June 2020?


      • down 5% +
      • down 2.5%
      • Even
      • up 2.5%
      • up 5%



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