The Parliamentary Commission on Banking Standards has put further pressure on the Government to investigate the splitting of the Royal Bank of Scotland into a “good” and “bad” bank.
Writing in today’s Financial Times, commission chair Andrew Tyrie argues RBS should “focus on its core UK business, serving its personal, small and medium-sized enterprise and corporate customers”.
He added it was important for all of the options for the state-backed bank’s future structure to be examined “as a matter of urgency”, including splitting the organisation into a separate “good” bank, which could be sold off, and a “bad” bank which would be state-owned and contain all of its toxic assets.
Tyrie’s letter says: “No obstacles should be put in the way of a full examination of all aspects of such a split. As our report explains, there are many issues to address, including the impact on the public finances.
“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.”
In a report published in June, the commission called for the Government to examine splitting RBS into a good/bad bank and whether the good bank could be sold off to create multiple firms, therefore fostering competition.
Chancellor George Osborne has ordered a report this autumn on whether the bank could be split in two, although the Financial Times reports some RBS and Treasury officials are against a split.
The FT reports that those close to the RBS inquiry say it has so far thrown up little evidence that the bank’s lending capacity is being constrained by troubled assets on its balance sheet. Moreover, the paper reports that some officials would be delighted if a split was rejected.
Tyrie adds: “The chancellor’s review also needs to examine whether, over time, the taxpayer may in fact be better off as a result of a split. Formal accounting conventions should not be allowed to get in the way of what is best for the economy in general and the SME sector, for whom bank finance is particularly important.”