Royal Bank Of Scotland Could Be Split Up Under Commission's Plans

RBS

Will Stephen Hester be pleased ?

George Osborne could have his hopes a rapid privatisation of Royal Bank of Scotland scuppered by the parliamentary commission on banking standards, which is said to preparing to recommend the bailed-out bank be nationalised and split into a good and bad bank.

An early draft of the commission's work – which began last September following the Libor crisis – is circling ahead of a formal meeting of the commission members to ratify the report next week. According to the BBC's Robert Peston, the commission wants RBS broken up into a good and bad bank, a move which the chancellor has told the commissioners during his evidence would cost £10bn.

Osborne is thought to be hoping the commission's report will be published before his Mansion House speech to the City on 19 June where he wants to outline a strategy for returning the 81% taxpayer owned RBS to the private sector and the 39% stake in Lloyds Banking Group.

It was not immediately clear how precisely the draft spelt out a division of RBS. It seems likely that the commission is in fact divided over whether the bank should be split up, but even the most subtle of references will present Osborne with a dilemma as he attempts to a pre-election sale of the bank.

Lord Lawson, a member of the commission, has made it clear that splitting the bank is his preferred option for RBS.

The Treasury has already been asked by the select committee – also chaired by the Conservative MP Andrew Tyrie who chairs the banking commission – for a report on the cost of breaking up RBS. When outgoing governor of the Bank of England Sir Mervyn King appeared before the commission he also said he thought RBS's troubled assets needeed to be hived off.

The Treasury is yet to reply to that request and Osborne has said he is working on a strategy after the intervention by the International Monetary Fund in May calling on him to devise a "clear strategy" for the two bailed-out banks.

Last month, he said: "Having refocused their business, now is the time for clear strategy in how to return RBS and Lloyds to the private sector in a way that protects value for the taxpayer".

According to the BBC one idea being explored by the Treasury is to transfer RBS's Ulster Bank to the Irish government via Ireland's National Asset Management Agency. Stephen Hester, the chief executive of RBS, has questioned whether more taxpayer cash should be poured in to the bank, on top of the £45bn used to buy shares, to strip the bank of toxic assets. At the recent results, he said: "Clearly, if government, for one reason or another, thought that it was a good use of public money to take some headaches off us, why would we complain about that or why would we refuse to consider it?"

"Of course, there's a separate debate about whether more public money in RBS's direction is necessary or a good thing," he added.

Some ideas on the future of RBS are expected to be contained in a document due to published this month by the Policy Exchange thinktank which may also frame Osborne's thinking.

The RBS chief executive has questioned whether more taxpayer cash should be poured in to the bank, on top of the £45bn used to buy shares, to strip the bank of toxic assets. At the recent results, he said: "Clearly, if government, for one reason or another, thought that it was a good use of public money to take some headaches off us, why would we complain about that or why would we refuse to consider it?"

"Of course, there's a separate debate about whether more public money in RBS's direction is necessary or a good thing," he added.

Some ideas on the future of RBS are expected to be contained in a document due to published this month by the Policy Exchange think tank which may also frame Osborne's thinking.

The banking commission declined to comment.

Powered by Guardian.co.ukThis article was written by Jill Treanor, for guardian.co.uk on Tuesday 4th June 2013 10.07 Europe/London

guardian.co.uk © Guardian News and Media Limited 2010

 

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