Asset Protection Scheme-Dead in the Water?The APS was announced in the dark days of January, and was a good idea at the time. It proposed insuring hundreds of billions of "toxic" assets on the balance sheets of RBS and Lloyds (well, the bit over a 10% first loss to be taken by the banks)in return for large fees payable to HM Govt and making large lending commitments-£9b of mortgage lending an £16b of business lending in the case of RBS. Most reports state that the latter condition has been reneged on.
The world looks very different now compared to January. 3 month Libor indicates how well bank funding is working. It was then Base+75bp; it is now Base+6bp. AAA asset backed bonds have gone from 60-ish to 90-ish. Other banks have found market-driven solutions, such as Barclays' Protium, where $12.3bn of assets have been hived off into a separate asset management company. Several other banks are said to be looking at this approach.
The APS, ironically, has probably done its job by the very fact of being announced. Time to move on.
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