Although £70 billion or thereabouts has been shovelled into RBS in our name, we the tax paying public know remarkably little about what we have bought, or more precisely, what the risks are in getting our money back out of the assets we have bought.
The stated purpose for the bailout is to protect deposits from UK depositors so that the entire UK financial systems does not collapse, but the UK tax payer might well ask whose interests they are really protecting. Who for example benefits from the cash that is contributed by the UK government. Well one way of looking at the issue is the identity of the borrowers whose loans are written off. OK they may be bust, but it is to their benefit that the loans are written off. Alternatively, where the loan is against real estate, the beneficiaries might be said to be the developers or sellers who got paid top dollar for their property by the buyer financed by RBS.
So where are these risky assets? Are they in the UK or elsewhere? The short answer is that RBS aren't telling. They list the source of many of the assets on which they have taken writedowns as being UK retail, US commercial loans, but large volumes are simply designated as losses from "Global Markets". For example, 87% of writedowns taken from the non-core division (i.e. the part they expect most of the losses to occur) come from Global Markets rather than specifically from the UK, Ulster or the US.
The interim statement is less than clear on the matter.
Similarly £160 billion of the approximately £240 billion of assets covered by the Asset Protection Scheme come from Global Markets or the non-core division. And that is just the dodgy part of the business. We have no idea how much non-UK risk has been assumed in our name, either through the APS or by the share purchase, but two things we can be sure about. First it is more than we are being told and second, neither the FSA nor the Treasury have any idea about the riskiness of the assets they have bought.