ROYAL Bank of Scotland (RBS) yesterday unveiled a plan to restructure up to £15.8bn of debt in a balance sheet overhaul that will generate a £1.25bn gain for the bailed-out bank.
RBS, 84-per cent government-owned after it was rescued at the height of the financial crisis, flagged the move last month.
It said yesterday it expected to buy back or exchange £6.2bn of debt as part of the overhaul. It expects the move to boost its core Tier one capital ratio, a key measure of financial strength, by around 30 basis points.
Unlike rival bailed-out bank Lloyds Banking Group, RBS said it had decided against issuing contingent capital under the programme but would retain Tier one and Tier two debt that could be used at a later stage. Contingent capital is debt designed to support the bank’s core Tier one capital if it falls below a certain level.
“While our Tier one ratio is expected to decline modestly, we expect our Tier one capital ratio to be in line with our peer group following the transaction,” finance director Bruce Van Saun said. “We have decided not to include a contingent capital instrument in our liability management initiative since we saw limited benefits from doing so.”