Ulster Bank awaits plan for RBS break-up

Ulster Bank remained silent yesterday on reports that the UK government will consider hiving off some of its problem assets as part of a wider solution to the financial difficulties of its parent group, Royal Bank of Scotland.

"We will have to see the proposals before making comment on them," a spokeswoman told The Irish Times.

This follows a speech by UK chancellor George Osborne on Wednesday night in London where he said his department would look at the possibility of a good bank-bad bank solution for RBS, which is 81 per cent state owned, to make it attractive for sale to private investors.

“We’ll look at a broad range of RBS’s assets, but particularly assets in Ulster Bank and UK commercial real estate,” Mr Osborne said in relation to a possible break up of RBS.

“We will see whether its right for Britain to, in effect, see RBS broken up,” the chancellor added.

Mr Osborne said that in hindsight it probably would have been better for RBS to have been split into a good bank and bad bank in 2008, when the global financial crisis hit.

Opinion divided
He said opinion on such a move now was divided but said a review would be carried out by the UK Treasury with "external professional support".

It is expected the review will take three months to complete and Mr Osborne said he would make a decision on a potential break up of RBS in the autumn.

The chancellor made clear that he was not prepared to put anymore taxpayer funds into RBS as part of this process.

Ulster Bank has effectively already taken this course by splitting its business in Ireland into core and non-core, which comprises many problem development and property loans that will be run off over time.

'Bad bank' assets
RBS has provided more than £15 billion in capital to Ulster Bank since 2008. It is not clear what Ulster Bank assets might be placed into a "bad bank" but it could include its non-core book and its near €9 billion portfolio of tracker mortgages, which are loss-making.

Speaking ahead of a meeting of euro zone finance ministers yesterday, Minister for Finance Michael Noonan was asked if he was concerned about Mr Osborne's review and the effect it might have on banking here, where Ulster Bank is the number three player.

“We’ll see what happens, but we don’t have a particular concern about it at present,” he said. “The British government put money into the parent bank [and] Ulster Bank benefitted. But it should be remembered that AIB and Bank of Ireland are traded in the UK and in Northern Ireland, and the Irish taxpayer has put an awful lot of money in to support bank debt in Northern Ireland and in mainland Britain.”

Northern Ireland Finance Minister Sammy Wilson said he wrote to Mr Osborne in April suggesting a good bank and bad bank approach.

“The Ulster Bank . . . has between 30 per cent and 40 per cent of the market here and is key to the ability of local businesses to access the finance they need,” Mr Wilson said.

'Short-term needs'
"I am convinced that the approach Ulster Bank are taking is designed only to meet their own short-term needs and is damaging the longer term interests of the local economy here."