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Chancellor defied Treasury over RBS ‘toxic loans’

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18th Feb 2010
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Politicians are calling for an independent valuation of the government’s asset protection scheme following controversy over publicly funded plans to insure Royal Bank of Scotland’s toxic loans.

A leaked letter from Treasury permanent secretary Nicholas Macpherson to Alistair Darling revealed that the chancellor acted against a warning from the Treasury by underwriting £282bn of RBS’s toxic loans – some of which could cover legally tainted assets.

In the letter, Macpherson warned: “It will be impossible to make the scheme work without providing insurance for some of the tainted assets – that is, assets whose legality may not be certain”.

In response to the letter, Darling asserted that “wider public interest” in maintaining confidence in the banking sector meant it was “right to live within the residual risks”.

Liberal Democrat shadow chancellor Vince Cable is now calling on the chancellor and FSA chairman Adair Turner to commission a full independent valuation of the Asset Protection Scheme.

In a letter to the pair today, Cable said: “Not only is this a massive fraud on the taxpayer but it seems that we are now underwriting some potentially illegal assets.

“The chancellor must now order a full independent valuation of all assets in the Asset Protection Scheme.

“Having previously raised concerns about corporate governance at RBS and received no substantive reply from the FSA, it is now essential that the FSA review its procedures covering corporate governance”.

 

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