http://news.sky.com/story/998562/fsa-urges-rbs-invest ment-bank-rethink
The City regulator has told the boss of Royal Bank of Scotland (RBS) that he should consider selling its giant US retail bank and shrinking its controversial investment banking operations.
I have learned that the Financial Services Authority (FSA) has informed the taxpayer-backed lender that it is satisfied that RBS should be allowed to leave a massive state support scheme but warned it of the need for continued vigilance over the bank's financial health.
The message from the FSA came in a letter sent last week by Andrew Bailey, managing director of the FSA, to Stephen Hester, RBS’s chief executive.
FSA insiders said that Mr Bailey told Mr Hester that selling Citizens, its US banking arm, and radically reducing the size of its global banking and markets operation could be helpful in bolstering RBS's capital position.
The communication, which fell short of a direct instruction from the FSA, was made as part of a broader message signalling the regulator's approval for RBS's exit from the Asset Protection Scheme (APS), which was established in 2008 to insure the bank against losses on more than £275bn of toxic assets.
The Treasury, FSA and RBS could announce as soon as tomorrow that the lender will exit the scheme after satisfying regulators and the Government that there are no circumstances under which it would credibly make a claim using the APS scheme.
RBS's exit from the APS is expected to be positioned as a milestone in RBS's recovery by politicians and the bank. Selling shares owned by the taxpayer remains some way off, but this week's exit from the APS was a prerequisite for ministers to begin contemplating such a move.
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