Good Bank/Bad Bank review
Restructuring RBS for the future
We will now create an internal ‘bad bank’ to manage down about £38 billion of our riskiest assets. These consume 20% of our capital, and we plan to remove them from our balance sheet over the next three years.
The internal ‘bad bank’ will be called the RBS Capital Resolution. It will have strong, transparent governance through a board sub-committee that reports regularly to the main board.
We will also accelerate the IPO of Citizens. The process will begin in the second half of 2014 and should complete by the end of 2016.
Five years ago, our non-core assets totalled £258 billion. Since then we have made good progress in reducing risk through our Non-Core division: £220 billion of asset reduction to date. But we are still held back by risky, underperforming assets such as commercial real estate, Ulster Bank and the Non-Core division.
Dealing with these assets now will strengthen our capital position, and speed recovery in our core business and the path to privatisation. It will also remove distractions that have taken so much management time in recent years, stopping us concentrating fully on the customer. (“A balance sheet clean-up does not make a great bank on its own” Ross McEwan, RBS Group Chief Executive.)
Review of all our businesses
Ross McEwan has announced a complete review of all our businesses, and will reveal a new plan for the way we serve our customers in February 2014.
The demand for more labour and a surge in self-employment continues to drive the UK unemployment rate down. House price gains remain strong and inflation is still low. It’s been the story of the UK economy in 2014. But the missing piece of the puzzle remains wages. Until productivity improves, earnings are unlikely to budge.