LONDON, England -- Royal Bank of Scotland on Monday said it was considering further asset sales "not initially contemplated", as part of the talks with the government aimed at breaking free from a state-backed asset insurance scheme.
But the bankworkers union Unite condemned what it said were plans to cut up to 3,700 jobs across the bank's branches.
"For RBS to announce the cut of 3,700 frontline bank staff from their high street branches across the UK is absolute madness," said Rob MacGregor, Unite national officer.
The bank, which is 70 per cent owned by the state, said in a statement it was close to an agreement in the complex three-way negotiations between the bank, the UK Treasury and European competition authorities in Brussels.
In a crucial week for the UK's banking industry, Alastair Darling, the chancellor, is expected to tell the House of Commons that RBS will still sign up to the insurance scheme but under revised terms. Mr Darling will also update the House on the status of Lloyds Banking Group's involvement on the asset protection scheme.
It is understood that RBS will pay an annual fee of less than £1bn instead of the £6.5bn fee initially proposed. About £260bn to £280bn of assets will be insured, down from an initial estimate of £325bn.
The government is still set to inject about £26bn of capital into the bank in return for so-called "B" shares without voting rights, taking the state's stake to 84 per cent from the current level.
RBS has been in heated talks with the government about the disposals it will have to make in exchange for the taxpayer's ongoing financial support.
In his eight months as chief executive, Stephen Hester has radically redrawn the map of RBS's global operations. He put the group's Asian retail and commercial operations up for sale in February but in the UK, assets previously not considered include its insurance arm -- which includes the Direct Line and Churchill brands -- and its 300 RBS-branded branches in England and Wales.
Other assets include the group's wholesale banking businesses. Until now, RBS has ruled out the possible sale of Citizens, its US retail banking subsidiary. However, the discussions with the government have included the potential sale of Citizens. To rule out such a sensitive divestment, the bank has come under pressure to shrink other parts of its international operations.
"It remains RBS's goal that any required divestments do not threaten its recovery plan which is already under way," said the bank in a statement.
Shares in RBS plunged as much as 14 per cent at the open on Monday but recovered most of those losses to stand 7 per cent lower at 39p.
The bank expects to make further announcements on its involvement on the asset protection scheme by Friday, when it reports third-quarter results.
RBS is expected to absorb the first £60bn of losses on toxic assets insured by the government's APS scheme, rather than the first £19.5bn set in the original deal, although this includes £23bn of losses already absorbed since the scheme was devised in the spring.
Lloyds Banking Group has also been in discussions with the Treasury about its involvement in the asset protection scheme. The bank, which is 43.5 per cent owned by the taxpayer, is expected to reveal on Tuesday that it is prepared to pay a much higher-than-expected £2.5bn fee to secure its escape from the protection scheme and sign up to a string of tough measures.
Lloyds has won approval from the Treasury for an ambitious £21bn fundraising, which will include the biggest rights issue in history. In exchange for the government's support, Lloyds will also extend a stringent policy on pay and bonuses that it agreed earlier this year and will be forced to meet tough lending targets, according to people close to the matter.
© The Financial Times Limited 2009
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