MPs push for RBS break-up ahead of review

27th Aug 2013 08:56

A group of MPs have demanded a break-up of the Royal Bank of Scotland amid speculation that the proposal to break-up the lender into a good and bad bank will be thrown out.The Parliamentary Commission on Banking Standards has proposed dividing the state-owned bank into a so-called 'bad bank' of risky assets and a 'good bank' that is more capable of lending to businesses. Thus, in a letter published in the Financial Times on Tuesday, the Commission's Chairman Andrew Tyrie said: "Taking the 'bad assets' into a publicly owned entity at their true value does nothing to alter the underlying position of the economy, the public sector's net worth, or the future burden of taxation [...] Formal accounting conventions should not be allowed to get in the way of what is best for the economy in general and for the SME sector [...]." Advisors Rothschild and Blackrock are reviewing the case with a decision expected in autumn.Some officials fear that an impending report will deliver what the Treasury wants and reject the creation of a bad bank. Lord King, former Bank of England Governor, and Lord Lawson, former Tory Chancellor, have backed the idea which was proposed as an option by Tyrie's cross-party banking commission."It is crucial that Rothschild approach this important work with a good deal of independence of mind," Tyrie said.In the letter, he also expressed that it was important that all options for the bank's future were considered as a "matter of urgency".The 81%-state-owned group is to return to privatisation after being bailed out by the government in 2008 for £45bn during the financial crisis. Shares in RBS tumbled 3.14% to 333.80p at 09:22 on Tuesday.RD