Amsterdam: the most civilised city in the world, some might say. Famously permissive (although no tobacco allowed in those reefers these days) and offering a tight social safety net for the disadvantaged. What better place for a man unwelcome in his home nation and potentially about to lose his main source of income to rest up for a while…?
British banking’s lead UK pantomime villian, Sir Fred Goodwin, might consider such a move. After all, the Dutch have plenty of reasons to welcome him with open arms.
How many reasons? Well, potentially getting on for 200 billion of them, according to statements out of Sir Fred’s former play-thing, Royal Bank of Scotland.
To put it blunty, Sir Fred has saved the Dutch taxpayer one serious chunk of money. ABN Amro, the Dutch bank brought by RBS, would probably be in standalone trouble now if it had not been bought by RBS and friends.
Stephen Hester is pretty clear about the impact of ABN on the group’s Global Banking and Markets Division, which took in most of the parts of ABN that Sir Fred had coveted. Describing the huge losses suffered on that side of the business, Mr Hester says on page 12 of the RBS announcement: “Over 50% of these losses pertained to ABN AMRO-originated portfolios.” Ouch!
Let’s look at those losses. According to the statement these were: £5.8bn from trading asset writedowns, counterparty failures and reserving (Blam!); £6.9bn from previously identified credit market exposures (Thwak!); and £7.7bn from goodwill writedowns related to the ABN deal (Pow!).
OK, so the goodwill is unfair because the Dutch would not have had that as a cost, but you get the picture. So that’s half of £12.7bn, making £6.4bn in write downs alone he’s saved the Dutch taxpayer – more than enough for them to cover his pension, surely…
Ah, but wait, what’s this: £325bn of assets now insured up by the UK government to prevent the bank collapsing beneath the weight of bad assets? We have very few details on these, with the joint Treasury-RBS regulatory statement simply saying:
The assets would be drawn from RBS’ and certain of its affiliates’ portfolios of corporate and leveraged loans, commercial and residential property loans, structured credit assets and such other assets as the Treasury and RBS agree are to be included in the Scheme. It is also envisaged that the Scheme may include structured synthetic assets and counterparty risk exposures associated with certain derivatives transactions with monoline insurers and credit derivative product companies.
Are we wrong to think that those are the sort of assets a bank might hold in its GBM division? Ok, some of the corporate and property stuff could be from elsewhere, but we have few real details.
Yet if more than half the losses in the GBM unit come from ABN portfolios it seems fair to guess that HM Treasury is insuring something north of £163bn of junk bought by Sir Fred in the ABN deal.
There’s only one further question: what is Dutch for Sir?
Related links:
Is Robert Peston a government stooge? – FT Alphaville
RBS taps UK Treasury for £25.5bn – FT