The government’s Asset Protection Scheme is designed to protect financial institutions against exposure to exceptional future credit losses on certain portfolios of assets.
The government’s Asset Protection Scheme is designed to protect financial institutions against exposure to exceptional future credit losses on certain portfolios of assets.
Under the Scheme, in return for a fee, the Treasury will provide to each participating institution protection against future credit losses on one or more portfolios of defined assets to the extent that credit losses exceed a “first loss” amount to be borne by the institution.
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 10 per cent. of the credit losses which exceed the “first loss” amount.
The Treasury will, in the first instance, offer protection to UK incorporated authorised deposit-takers - including UK subsidiaries of foreign institutions - with more than £25 billion of eligible assets. Affiliated entities will also be considered by the Treasury for protection under the Scheme in the light of its assessment of the impact on financial market stability and the overall economy and the most effective possible use of public resources.
The Treasury will subsequently consider extending the Scheme more widely to other UK incorporated authorised deposit-takers, including UK subsidiaries of foreign institutions.
Treasury statement
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