Rate of default on RBS cards raises borrowing fears
0 Comments | Herald, The; Glasgow (UK), Jul 29, 2010 | by MARK WILLIAMSON
A RATINGS agency has highlighted an increase in the rate of default on some of the credit cards issued by Royal Bank of Scotland, which may heighten fears about the scale of consumer borrowing.
Standard & Poor’s said it had placed some of the notes issued by a vehicle that was used to securitise credit card debts originated by RBS on negative creditwatch.
The agency said the rate of charge-offs, or bad debts, on the cards concerned had been rising since the end of 2008. Charge- offs reached a high of 11.14% in March.
The rate fell back to 9.24% in May 2010.
However, Standard & Poor’s said the three-month moving average charge-off rate increased for the past four months.
It noted that an increasing number of cardholders had moved on to repayment plans, indicating that they could not meet the original repayment schedule.
Taking both factors into account, the agency has increased its charge-off base case assumption to 10.5% from 9.2%.
Standard & Poors said it had placed negative creditwatch ratings on Arran Funding’s class B3, C1, and C3 notes, series 2005-B and its class A2 and A3 notes
It also affected series 2007-A, and Arran Funding’s class A notes series 2008-A.
All the other notes in the Arran Funding Trust were unaffected by this action.
It said the Arran Funding Trust is backed by UK credit card receivables originated by RBS.
RBS declined to comment.