Asset protection fees set too low

The Government did not set fees high enough in the toxic asset insurance scheme for bailed-out banks, according to a report published by the National Audit Office (NAO) today.

The watchdog said the Treasury could have fixed a higher minimum charge for Royal Bank of Scotland to use its Asset Protection Scheme (APS), while Lloyds Banking Group could also have been charged more than the £2.5bn it paid in exit fees when it decided to pull out this year.

The APS was further criticised for not doing more to encourage lending, with Lloyds and RBS falling a long way short of business loan targets in the scheme's first year.

RBS faces a minimum charge of £2.5bn, but the NAO believes this could have been £4.4bn.