The Telegraph reports that the Parliamentary Commission on Banking Standards, chaired by Conservative MP Andrew Tyrie, has argued the case for dividing the bank into two, thus creating a so-called 'bad bank' of risky assets and a 'good bank' that is more capable of lending to businesses.
In June, the Chancellor said he was reviewing 'whether it’s right for Britain to, in effect, see RBS broken up', adding that a decision would be taken by autumn. The review is being carried out by Rothschild and BlackRock, and comes amid reports that Treasury officials are veering towards keeping RBS as one entity.
The Treasury is currently weighing arguments for and against splitting up RBS, with George Osborne having ordered a review into whether ringfencing its portfolio of toxic loans would boost lending and help the economy.
Disagreement over the idea of a split is believed to be behind the departure of Mr Hester, who will be replaced by Ross McEwan, the head of RBS’s retail division, on October 1 – shortly after the review into the split is due.
The commission’s letter, which argues that 'formal accounting conventions should not be allowed to get in the way of what is best for the economy in general', reflects fears that the split will be opposed.
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