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Treasury Minister Sajid Javid: "It's good news for the UK banking sector as a whole"
Royal Bank of Scotland (RBS) has moved a step closer to becoming a private company after withdrawing from a government scheme that insures the bank's riskiest assets.
The Asset Protection Scheme was set up in 2009 and would have meant that taxpayers had to absorb any losses.
Since then, RBS has been able to get rid of half of the £280bn of loans and investments it put into the scheme.
The bank, 82% owned by UK taxpayers, paid £2.5bn to use the scheme.
BBC business editor Robert Peston said: "Royal Bank of Scotland has moved a step nearer financial rehabilitation and eventual privatisation."
However, Treasury Minister Sajid Javid said the government was not planning to sell its stake in the near future.
"We've said all along that it's our intention eventually to return it fully to the private sector and today's news is a significant step towards that," Mr Javid told BBC News.
"But in terms of eventually selling our stake, that will be done with due regard to taxpayers' interests. So we'll continue to work on that, but that's more of a longer-term nature."
End QuoteBy withdrawing from the scheme, with the agreement of the Financial Services Authority and the Treasury, RBS will be saving itself £500m a year in fees"
RBS shares rose almost 3% to 287 pence after the announcement. But the shares would have to almost double, to 500p, for the government to break even on its investment in the bank.
Leaving the scheme will save RBS £500m a year.
But Robert Peston pointed out that it had not been bad value for RBS, because without the insurance, it would have been forced to sell its bad loans faster and for less money, creating even bigger losses.
RBS chief executive Stephen Hester said in a statement: "The APS has played a valuable role, buying time for the Bank as we implemented change from the worrying days of 2009 to create the much stronger institution it is today."
Under the scheme, banks paid an annual fee for the insurance and were then liable for the first 10% of losses on the assets it covered.
The taxpayer would have covered any losses over 10%.
RBS' departure from the scheme has been approved by both the Treasury and the Financial Services Authority.
Continue reading the main storyHaving joined the scheme, RBS had to pay a minimum of £2.5bn of fees, which took it up to this week, meaning that it is leaving at the first opportunity.
RBS will pay its final premium for the scheme on Thursday.
It was the only bank to take on APS protection. Lloyds Banking Group took part in initial discussions about joining the scheme and paid £2.5bn without joining it.
The Treasury explained that the Lloyds payment was for the implied protection it had had while discussions were taking place.
RBS was among the banks worst hit by the financial crisis, with its 2007 acquisition of ABN Amro leaving it short of cash and holding considerable amounts of bad debts.
It had to be bailed out by the government, which now owns 82% of the bank.
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