UK government seeks EU approval for RBS split

7th Oct 2013 09:07

The UK government has applied for European Union (EU) approval to break up state-owned Royal Bank of Scotland (RBS) into a 'good' and 'bad' bank.Chancellor George Osborne filed papers in July notifying the European Commission of the proposed measures at RBS, which is 83% owned by the taxpayer. The government has recommended splitting the bank, hiving off toxic assets into a 'bad bank' to create a 'new' RBS that could be more easily privatised. Shares in the 'new' RBS would be worth about 540p, above the 500p break-even for the taxpayer to make a profit, according to UBS.Osborne has ordered a review into whether breaking up the bank would boost lending. Officials familiar with the case told the Financial Times the new application to Brussels would not prejudge the review, which is due to conclude this month. If the application is approved, it is expected to avoid tougher revised EU conditions on state support to banks and a £471,000 cap on executive pay.Osborne has discussed the potential impact of the Europe's stricter rules with EU competition commissioner Joaquín Almunia.RBS was bailed out by the UK government in 2009 following approval from Brussels.Shares in the lender fell 1.18% to 368.80p at 09:36 on Monday.RD