RBS falls five per cent on break-up claims

21st Oct 2013 11:47

Shares in Royal Bank of Scotland led London's FTSE 100 Index lower this morning on claims that the UK government was moving closer to breaking up RBS into a 'good' and 'bad' bank.The stock had fallen 18.9p to 353.8p at 12:15PM in London on a report that Chancellor George Osborne is to give the go-ahead for splitting the bank in the next few weeks.Although the UK Treasury was still reviewing options for RBS, there was no chance the bank could be left in its current form, Osborne reportedly told The Daily Telegraph.The Treasury is understood to be weighing up three options for dealing with the bad loans of RBS, including setting up a 'bad bank' inside RBS under the supervision of an independent team.Other options would include creating a separate bank backed by the Bank of England to hold up to £60bn of toxic assets, or to create an entirely separate taxpayer-backed 'bad bank'.Osborne said: "We are looking at the case for a bad bank and if not a bad bank what is the alternative strategy that really gets on top of the problems."Broker Nomura kept its 'reduce' rating on RBS in a note on Monday, saying it believed minority shareholders had a lot to lose if the bank faced a break-up or other major changes."We think it is becoming more likely that the 'Good Bank-Bad Bank' review will result in significant change for RBS," it said.But another broker, Shore Capital, said it understood that any break-up may need approval from minority investors, giving them the chance to block any proposal that damaged their interests."We continue to believe that any good bank/bad bank split will not prove onerous for minority shareholders," Shore said.