RBS Reports Record Loss, Gets State Insurance

Royal Bank of Scotland reported a record loss of 24.1 billion pounds ($34.2 billion) for 2008 Thursday and announced a sweeping restructuring plan aimed at restoring the bank's strength.

RBS intends to take part in a government scheme to insure assets with assets with a par value of 325 billion pounds, the bank said in a statement. The agreement would see RBS bear the first loss amount relating to the assets in the scheme up to 19.5 billion pounds, it said.

The government's stake in the bank will increase to above 80 percent from the current 70 percent, UK Chancellor of the Exchequer Alistair Darling said.

The UK Treasury plan, which was announced last month, will allow banks to insure their riskiest assets against steep losses in exchange for a fee and commitment to raise lending.

Sharon Lorimer

RBS shares closed 25.5 percent higher, shares of Lloyds Banking Group, which has also benefited from government funds, jumped 30.7 percent while Barclays was up 7 percent.

The scheme is open to UK deposit takers with more than 25 billion pounds of eligible assets and will cover 90 percent of losses which exceed "first loss" amount, the Treasury said Thursday.

The insurance coverage extends for a minimum of five years but financial institutions have until the end of March to subscribe, the Treasury said in a statement.

RBS, which is 70 percent owned by the British government, also said it would cut more than 2.5 billion pounds out of the group's cost base and expects to shift 20 percent of funded assets (or around 240 billion pounds) to a non-core division which would dispose of them over 3 to 5 years.

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