United Kingdom: HM Treasury: Chancellor of the Exchequer

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EliScholar – A Digital Platform for Scholarly Publishing at Yale YPFS Resource Library 1-19-2009 Statement on the Government's Asset protection scheme United Kingdom: HM Treasury: Chancellor of the Exchequer https://elischolar.library.yale.edu/ypfs-documents2/17  This resource is brought to you for free and open access by the Yale Program on Financial Stability and EliScholar, a digital platform for scholarly publishing provided by Yale University Library. For more information, please contact ypfs@yale.edu. Home >  Newsroom & speeches >  Press notices >  2009 Press Notices  >  January > Statement on the Government’s Asset protection scheme07/0919 January 2009Statement on the Government’s Asset protection schemeAs part of a a comprehensive package designed to reinforce the stability of the financial system, to increase confidence andcapacity to lend, and in turn to support the recovery of the economy the Government is today announcing its intention to offerprotection on those assets most affected by the current economic conditions. The Asset Protection Scheme is designed toprotect financial institutions against exposure to exceptional future credit losses on certain portfolios of assets.  In conjunctionwith the steps already taken by the UK authorities and in co-ordination with their international partners, the Scheme isdesigned to restore confidence to financial markets, supporting financial stability and the availability of credit to creditworthyborrowers in the economy.  The Government will be taking forward discussions in the coming weeks with its internationalpartners about the establishment and co-ordination of such schemes by a number of countries.  This document summarisesthe headline terms of how a UK scheme would be implemented.1. Introduction1.1 Under the Scheme, in return for a fee, the Treasury will provide to each participating institution protection against futurecredit losses on one or more portfolios of defined assets to the extent that credit losses exceed a “first loss” amount to beborne by the institution.  It is intended that the Scheme will target those asset classes most affected by current economicconditions.1.2 The Treasury protection will cover the major part but not all of the credit losses which exceed this “first loss” amount. Each participating institution will be required to retain a further residual exposure, which is expected to be in the region of 10per cent. of the credit losses which exceed the “first loss” amount.  This residual exposure will provide an appropriateincentive for participating institutions to endeavour to keep losses to a minimum.1.3 The Treasury currently expects that the fee will usually be satisfied by the issue of capital instruments of the participatinginstitution.  These instruments are not expected to include ordinary shares, but will include a range of alternative capitalinstruments.  The Treasury will be open to consider other forms of fee, including cash. 2. Eligible Institutions2.1 The Treasury will, in the first instance, offer protection to UK incorporated authorised deposit-takers (including UKsubsidiaries of foreign institutions) with more than £25 billion of eligible assets.  Affiliated entities will also be considered bythe Treasury for protection under the Scheme in the light of its assessment of the impact on financial market stability and theoverall economy and the most effective possible use of public resources.2.2 The Treasury will subsequently consider extending the Scheme more widely to other UK incorporated authorised deposit-takers (including UK subsidiaries of foreign institutions).  Further participation in the Scheme will be at the discretion of theTreasury taking account of the advice of the Bank of England and the FSA on the basis of its best judgment of how importantthe deposit-taker concerned is to financial market stability and the overall economy and the most effective possible use ofpublic resources.Newsroom & speeches[ARCHIVED CONTENT] Statement on the Government’s Asset protect... http://webarchive.nationalarchives.gov.uk/20100202140901/http://www...1 of 2 1/24/2018, 12:19 AM[ARCHIVED CONTENT] Statement on the Government’s Asset protect... http://webarchive.nationalarchives.gov.uk/20100202140901/http://www...2 of 2 1/24/2018, 12:19 AM

Statement on the Government\u27s Asset protection scheme

https://elischolar.library.yale.edu/context/ypfs-documents2/article/1016/viewcontent/Statement_20on_20the_20Government_E2_80_99s_20Asset_20protection_20scheme_20__20HM_20Treasury.pdf

Statement on the Government\u27s Asset protection scheme

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