Chancellor George Osborne has announced that Royal Bank of Scotland Group will shrink its investment bank business to focus elsewhere.
Osborne says as the largest shareholder the government believed RBS’s future was as a major retail bank.
In its response to the Independent Commission on Banking, Osborne says investment banking will continue to support its corporate lending business.
However, he says the bank will make further “significant reductions” in the investment banking business and scale back resources.
Osborne says: “We believe RBS’ future is as a major UK bank, with the majority of its business in the UK and in personal, SME and corporate banking.
“Investment banking will continue to support RBS’s corporate lending business but RBS will make further significant reductions in the investment bank, scaling back riskier activities that are heavy users of capital or funding.”
“RBS should emerge a stronger, safer bank, able to maintain lending to businesses and consumers, and which in time can be returned to full private sector ownership.”