The Parliamentary Commission on Banking Standards has called on the Government to publish by September a report on breaking up the Royal Bank of Scotland.
The commission’s final report, published this week, says the Government must examine the case for splitting RBS into a “bad bank” and a “good bank”, which could be sold off.
It says the Treasury must also consider the merits of breaking up the good bank and selling off parts to create multiple firms with the aim of fostering competition.
The commission initially considered calling for the bank to be split, but fierce divisions in the cross-party panel has seen proposals watered down.
RBS chief executive Stephen Hester quit last week and Chancellor George Osborne said the bank will now move on from the “rescue phase” to privatisation.
The commission said the other major state-owned bank, Lloyds Banking Group, is better placed to return to the private sector without restructuring because it is “largely a retail bank” and has “avoided the same public focus on its remuneration policies”.
The report also calls for UK Financial Investments to be wound up as it is acting as a “fig leaf” to hide direct Government interference in the banks it owns.
Commission chair Andrew Tyrie says: “The current state of RBS creates problems for banking competition and for the British economy. Further restructuring may well be needed. The Government may need to be bold.”
Banking consultant Mehrdad Yousefi says: “Any cost-benefit analysis will show beyond doubt that splitting RBS is a bad idea.”
Read our full coverage of the Banking Commission’s final recommendations: