George Osborne under pressure to speed up Royal Bank of Scotland split

MPs voice concerns that chancellor will row back on plan to break up RBS to avoid disrupting the bank's recovery

An influential group of MPs has stepped up its drive to have Royal Bank of Scotland split up, amid concerns that Whitehall officials could back away from the proposal.

Members of the parliamentary commission on banking standards have demanded that plans go ahead to split the operations of the troubled institution, which is 81% owned by the taxpayer, into a so-called good bank and bad bank, in a bid to speed up its recovery and the sale of the government's stake and to help it increase business lending.

The split, which is designed to take toxic loans off its balance sheet and place them with a state-owned bank, has the backing of former Bank of England governor Mervyn King and the former Tory chancellor Lord Lawson.

The chancellor, George Osborne, has asked for a report by advisers Rothschild and Blackrock Solutions on whether the plan is likely to work, but reports suggest the inquiry has found little evidence that the bank's lending capacity is being constrained by bad debts and it is believed the bank sees the proposed changes as unnecessarily complex.

The commission, chaired by Conservative MP Andrew Tyrie, now fears Whitehall officials and the chancellor himself will sweep the proposals under the carpet to avoid disrupting the bank's recovery.

It has written to the Financial Times insisting on a speedy resolution.

In the letter, the commission writes that it is "important for all the options for [RBS's] future structure to be examined as a matter of urgency". It 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."

Tyrie said: "It is crucial that Rothschild approach this important work with a good deal of independence of mind."

Aides to the chancellor have insisted that, in his view, there are no presupposed right or wrong answers and that he is open to suggestions on the idea of a split. But some Treasury officials are believed to share the view of the bank's outgoing chief executive Stephen Hester, who is opposed to the plan.
Article Source : http://www.guardian.co.uk
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