ROYAL Bank of Scotland (RBS) has confirmed shipping loans will be included in the £38 billion worth of assets it intends to place in its new internal "bad bank".
The bank's shipping portfolio is being assessed as part of a general strategic review, which was launched by chief executive Ross McEwan on November 1, when he announced RBS would set up a capital resolution group to deal with its most problematic assets.
A report commissioned by the Government had earlier stopped short of recommending the creation of an external bad bank.
The confirmation came as it was reported shipping loans worth billions of dollars will be placed by RBS in its internal bad bank.
A report said RBS will put $4 billion to $5bn (£2.5bn to £3.1bn) of shipping loans in the division, but the bank declined to comment.
The bank said some of its shipping portfolio would be placed in the capital resolution group, but not all of it.
Shipping has been a major drag on the bank as the industry has faced one of its worst downturns in decades.
Ship owners ordered large numbers of new vessels between 2007 and 2009 just as the global economy hit its deepest crisis since the 1930s.
A source said: "A big chunk [of the shipping portfolio] will go into the bad bank and the intention is to sell it down as quickly as possible. They will definitely also exit a number of relationships, even on performing loans. It will be a much smaller exposure for a much smaller bank."
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