Tonight:
9°c
Regulator puts a block on bond repayments by RBS
04.09.09
The Financial Services Authority (FSA) has told the Royal Bank of Scotland (RBS) it should not repay four bonds with a total value of £950 million next month until the European Union completes its probe into state aid for the part-nationalised bank.
The ruling comes under the European authorities' advice that banks which have received state bail-outs as a result of the global credit crunch should spread the pain across shareholders and bondholders.
The four bonds, which include two euro-denominated issues for NatWest and two Australian dollar bonds, pay interest of between 6% and 7%.
RBS is under no obligation to repay them during October, although this would have been the first month when it could choose to do so. It will continue to provide interest on the bonds until it is allowed to repay them.
Banks generally retire such callable bonds at the first available date, paying a small premium to do so, but at current wholesale interest rates RBS is under no great pressure to do so.
Bond traders said the FSA objection to repaying the bonds was a technical matter.
