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Good RBS, Bad RBS


Royal Bank of Scotland is splitting into two:

The Royal Bank of Scotland (RBS) is to be split into a “good bank” and “bad bank” in a dramatic rescue restructuring in which assets worth several hundred billion pounds will be put up for sale.

Stephen Hester, RBS chief executive, will outline the plans this week as he unveils Britain’s biggest-ever corporate loss of up to £28 billion. He will cut costs by more than £1 billion a year, a move expected to lead to the loss of about 20,000 jobs, more than half of which will be in Britain.

RBS will also place at least £200 billion of toxic assets into the government’s asset-protection scheme, a controversial insurance scheme designed to protect banks against further losses.

Billionaire investor Wilbur Ross leads a pack of vulture funds that are talking to the bank and the government about buying some of the bad loans, although it is unlikely a deal will be agreed in time for Thursday’s results. Virgin Money, Sir Richard Branson’s mortgage business, is another possible buyer.

The “good bank” will comprise retail and commercial banking in Britain, America and a handful of other countries where RBS has a significant presence.

So Infy was their “Best Technology Supplier” in 2007. Does it get the good bank, or the bad bank or both? Will there be enough work left, given most of the bad bank assets will be hived off? We’ll have to wait and see.

Some UK taxpayers must be pissed. Calculated Risk says they can put what they want in the bad bank, they take only the first 10% of losses – the UK taxpayer takes the rest.

Interestingly, they say they’ll do the same to Northern Rock. If everyone follows this model, we’ll have to change all the IVR software:

“Welcome to Big Bank. If you want the good bank, press 1. If you want the bad bank, don’t bother, we don’t take any phone calls. We’re that bad. Oh, and thanks for your taxes.”


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