World Economic

Royal Bank of Scotland reported the biggest loss in British history on Thursday and said the government’s stake could rise as high as 95 percent after it stumped up billions to insure risky bank assets.

RBS said the Treasury would inject a further 13 billion pounds to help the bank pay for a new scheme that will transfer most of the risk from 325 billion pounds worth of toxic RBS assets and risky loans to the taxpayer.

The so-called Asset Protection Scheme launched by the British Treasury on Thursday is expected to insure well over 500 billion pounds ($712 billion) worth of assets by the time other banks have signed up to it.

Banks around the world have trillions of dollars of potential losses on their books after the collapse of the U.S. property market triggered a credit crunch and then a full-blown global financial crisis.

Hiving off troubled assets and purging banks of their worst liabilities will be a focal point of discussion at next month’s meeting of G20 finance ministers and central bankers in Britain.

So far, there has been little consensus and international meetings earlier this month simply had to agree on looking at a common set of principles.

RBS said it made a 24.1 billion pound ($34.3 billion) loss last year, the biggest deficit in British corporate history.

Surpassing a 21.8 billion pound loss by Vodafone in 2006, the deficit represents 16 advanced payday loan.2 billion in write-downs against RBS’ acquisitions, including its 2007 takeover of parts of ABN Amro, and 7.9 billion pounds in operating losses.

RBS shares, which have lost 95 percent of their value since early 2007, were up 22.9 percent at 29.4 pence by 8:07 a.m. EST, while the FTSE 100 share index was 1 percent higher. UK gilt prices fell sharply.

“The favorable pricing of the asset protection scheme, along with the additional capital injection from the government, will remove the immediate capital concerns about RBS,” Panmure Gordon analyst Sandy Chen wrote in a note to clients.

“For now, the markets will probably focus on the favorable terms of this bailout.”

Shares in Lloyds Banking Group were up 25 percent ahead of its results on Friday when the bank is also expected to sign up to the insurance package.

Lloyds said on Thursday that it was in talks with the Treasury about participating but that there was no certainty its involvement would be on the same terms as RBS.

“GAMBLING DENS”

RBS also unveiled plans to cut 2.5 billion pounds ($3.56 billion) in costs as part of a restructuring plan which will see it exit or reduce its presence in 36 of the 54 countries it operates in. 

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