The powers that be have insisted the application does not signal a decision from the chancellor about whether he will try and break up RBS or not. A review is currently under way to establish whether hiving off its bad assets into a separate bank will speed up RBS’ recovery and increase lending. Osborne is expected to climb off the fence and announce his decision in the next few weeks.
The chancellor is hoping the EU will give him permission to split the bank without getting tangled in new state-aid rules. He first filed papers to the European Commission informing them of his intentions back in July - just days before the more stringent laws were introduced – in a bid to mitigate their effect on RBS.
The new rules say senior staff at state-backed banks cannot earn more than 15 times the national average salary or ten times the wages of the average worker at the bank. This would cap newbie chief executive Ross McEwan’s pay at £471,000 (less than half of what has been agreed – ouch).
Osborne has been chatting with EU competition commissioner Joaquin Almunia about his plans. RBS has already had to dance to the EU’s tune in return for its £45.5bn bailout in 2009. The EU approved the original bailout on the grounds the bank reduced its balance sheet and sold off some 314 branches.
Shares in the 82% taxpayer-owned bank fell 0.5% to 372.5p this morning, valuing it at £42.1bn.
If a full split does not go ahead, it is thought the chancellor might create an ‘internal bad bank’, by enlarging and rebranding the banks existing ‘non-core’ arm. Either way, the added complexities of a split could scupper the government’s plans to finish reprivatisation before the 2015 election. Bad news for Osborne and co, who are eager to turn RBS into a billion pound success story before they hit the soapboxes. Decisions, decisions...