Chancellor Osborne faces call to split RBS into good and bad bank

4th Jun 2013 11:02

The Parliamentary Commission on Banking Standards has recommended splitting the Royal Bank of Scotland (RBS) into a good and bad bank in a draft report, according to reports Tuesday.MPs and Lords on the Commission have until next Monday to read through it, with a final report due by the end of the month.Chancellor George Osborne is expected to face calls from the Commission to follow through on the proposal which would see the RBS split into a bank ready for reprivatisation and a state-run bank holding the lender's bad assets.Among the backers of the proposed break-up are said to be Lord Lawson, former Conservative Chancellor, and Justin Welby, Archbishop of Canterbury. A source who has seen the draft told the Financial Times the report calls on the government to consider all its options, including various breakup ideas, and says the current strategy for RBS is not working. It also urges a new plan by September. Osborne, who is anxious to privatise the bank, has argued that such a move would require him to fully nationalise the bank at a cost of up to £10bn. He told the commission a split would be complex and time consuming, taking up to 18 months.However, sources on the Commission said the split was not a firm recommendation in the draft report - merely a reflection of the enthusiasm of some of the 10-member team for the idea. They do not expect a wholehearted endorsement of an RBS split in the final report.The news comes as RBS prepares to sell 315 of its branches as a condition of its £45bn taxpayer bailout in 2008.Last week, the bank was said to have culled the number of bidders of its branches down to three rival factions of London investors and private equity groups.Among the bidders is a consortium headed by former Tesco Finance Director, Andrew Higginson, which comprises more than 20 asset management companies, including Threadneedle, Invesco Perpetual and Schroders. Another in the running is a grouping of private equity firms Corsair and Centerbridge along with British investors including Standard Life and Lord Rothschild's RIT Capital. AnaCap Financial Partners, a London-based group, has confirmed it is also seeking to buy branches. Prime Minister David Cameron has said he wants the sale to begin "as soon as possible".RBS Chairman Sir Philip Hampton has stated that the bank would be ready for privatisation next year.RD