The Treasury will guarantee 90% of losses on toxic assets as part of its Asset Protection Scheme (APS), minister confirmed today.
Treasury protection will cover 90% of the credit losses which exceed an agreed 'first loss' amount, with each participating institution retaining exposure of 10%.Protection under the Scheme is offered, in the first instance, to UK incorporated authorised deposit-takers - including UK subsidiaries of foreign institutions - with more than £25bn of eligible assets.
Each applicant to the Scheme must convince the Treasury: it is adequately capitalised and funded or has a realistic plan for accessing adequate capital and funding; it has a sustainable business model and delivery plan; its funding profile, sources and mix are broad-based and sustainable; and its senior management team is credible, with demonstrable ability to deliver its business model and delivery plan.
Applicants to the scheme will be required to comply with a remuneration policy consistent with the FSA's code of practice on remuneration policies, which was published today.
The Treasury says, to protect taxpayers' interests, participants will be subject to a number of conditions and Treasury controls over the management of protected assets.
These requirements are expected to include: managing protected assets according to agreed principles and guidelines; requiring participating institutions to set up effective operating structures to manage and report on protected assets in a regular, transparent, and comprehensive fashion and the implementation of monitoring and reporting systems which allow verification of asset performance and facilitate determination of payouts.Mortgage Solutions
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