MPs put pressure on RBS split

An influential group of MPs pushes for a break-up of Royal Bank of Scotland, as Whitehall officials go lukewarm.

by Elizabeth Anderson
Last Updated: 07 Oct 2013

The influential Parliamentary Commission on Banking Standards has said that options for RBS’s future structure need to be ‘examined as a matter of urgency’, amid concerns that Whitehall officials are cooling off on the idea of a split.

In a letter to the Financial Times, chair of the Commission Andrew Tyrie says there are many issues that need addressing, including the impact on the public finances, but that splitting up the bank will make it more saleable.

The chancellor’s review needs to have an open mind and should ‘examine whether, over time, the taxpayer may in fact be better off as a result of a split,’ he said.

Conservative MP Andrew Tyrie supports the idea of dividing the 81% state-owned bank into two, thus creating a ‘bad bank’ of toxic loans and a ‘good bank’ that is more capable of lending to businesses. It is thought the split might help RBS return to good health, speeding up the sale of the government's stake in the good bank. Former Bank of England governor Mervyn King has backed the idea of a two-tier bank, along with former Tory chancellor Lord Lawson.

Chancellor George Osborne has commissioned a report to test whether the plan will work. But RBS and some Treasury officials see the proposed changes as too complex, and point out that the split could leave the taxpayer burdened with yet more bad debt.

Confused about the RBS split? Here's everything you need to know but were too afraid to ask.

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