London - State-rescued Royal Bank of Scotland announced on Friday plans to create an internal 'bad bank' to run down £38 billion of high-risk assets and accelerate its return to the private sector.
RBS hopes to remove all of the toxic assets, equivalent to $61 billion or 45 billion euros, from its balance sheet over the next three years, the bank said in a statement as it announced also a third-quarter net loss of £828 million.
The lender, 81-percent-owned by the British government after the world's biggest banking bailout in the wake of the 2008 financial crisis, said it had decided against creating an external 'bad bank' owing to the risk and expense involved.
“Our goal is to remove between 55 percent and 70 percent of these assets over the next two years,” RBS chief executive Ross McEwan said in the statement.
“While there is inevitable uncertainty associated with running down such assets, we have a clear aspiration to remove all these assets from the balance sheet in three years,” he added.
RBS had in August promoted New Zealander McEwan to the post of chief executive.
The former head of retail at the bank has replaced Stephen Hester, who surprised markets in June by announcing that he would leave the bank before the end of 2013.
His departure, reportedly at the request of Britain's coalition government led by Prime Minister David Cameron, has sparked questions about the strategy for the state-rescued bank.
Analysts believe that British finance minister George Osborne wanted a new face to help guide Royal Bank of Scotland's return to private ownership.
Osborne said in a statement on Friday: “Today RBS sets out a new direction - a new direction that will lead it to being a boost to the British economy instead of a burden.”
He added: “Under this new direction RBS will deal decisively with the problems of the past by separating out the good from the bad, and putting the bad loans in a bad bank. Our independent analysis shows that the bad bank should be an internal one, funded by RBS, rather than an external one funded by the taxpayer.” - Sapa-AFP