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MPs call for Lloyds/RBS ‘good’ and ‘bad’ banks

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Treasury select committee chair Andrew Tyrie

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The Treasury select committee has called on the Government to investigate the pros and cons of breaking up Lloyds Banking Group and Royal Bank of Scotland and to publish an analysis by June.

In its Budget 2013 report, the TSC said it wants to see an analysis of whether splitting each bank into “good” and “bad” banks would work. The idea would be for a so-called bad bank to house toxic loans held by Lloyds and RBS.

Last month at a Parliamentary Commission on Banking Standards session, Bank of England governor Sir Mervyn King said a split is not “beyond the wit of man”, claiming the RBS rehabilitation is taking too long. He was supported
by Capital Economics economist Roger Bootle and Goldman Sachs chief economist Michael Saunders.

The report states: “Such an analysis should include an examination of the fiscal and competition implications and be completed by the time of the announcement of the
Government’s spending review in June.”

Banking consultant Mehrdad Yousefi says: “It is unimaginable that any Government could set up a bad bank halfway through the bailout of RBS and Lloyds. 

“A cost-benefit analysis is a foolish suggestion that is four years too late.”

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