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Royal Bank of Scotland reassesses small business loans

Royal Bank of Scotland, the UK bank which is majority owned by the UK taxpayer, has confirmed that a number of unprofitable small-business loans and overdrafts have been transferred into a non-core subsidiary. Despite assurances that customers will see no difference in the level of interest rate or level of performance there are fears that those in difficulty may see their situations compounded in the short to medium term.

The bank has made no secret of its wish to wind down a number of unprofitable loans and overdrafts although the fact it appears to have chosen the middle of a recession to do so has caused concern to many people. This is part of Royal Bank of Scotland's overall plan to increase the quality and strength of its balance sheet although this particular move seems to be to the detriment of existing customers.

The UK government will again come under serious pressure to intervene as corporate profitability, even though the bank was bailed out by UK taxpayers, seems to maintain precedent over everything else. Time will tell whether those who have been moved "off-balance-sheet" will see a significant change in their situations.

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