RBS commits £25bn to new lending

The Royal Bank of Scotland has pledged £25bn to new lending as it injects £325bn of dodgy assets into the Treasury\'s Asset Protection Scheme.

RBS will have to stump up the money to cover the first £19.5bn of losses, but after that any further losses will be 90% covered by the Treasury and 10% by RBS. It will pay £6.5bn to participate in the scheme.

By participating in the scheme, RBS has also agreed to increase its lending to the tune of £25bn over the next 12 months to UK homeowners and businesses who meet RBS’ normal credit and pricing criteria.

The increased lending will be split £9bn to mortgage lending and the remaining £16bn to business lending.

A further £25 billion increase is targeted in 2010.

RBS also revealed this morning record losses of £24.1bn, the bulk of which came from its purchase of ABN Amro.

Stephen Hester, chief executive at RBS, says participation in the asset protection scheme would reduce risk for customers and provide greater support for UK customers via increased lending.

He says: “It would provide increased certainty to the market by limiting potential losses on a significant proportion of our balance sheet.”