BoE chief calls for break-up of stuttering RBS
Sir Mervyn King has called for Ulster Bank owner Royal Bank of Scotland to be split up and sold off within a year to end the "nonsense" of state ownership.
In a dramatic intervention, the Governor of the Bank of England said the UK risks a prolonged Japanese-style slump without a rapid privatisation of the high street lender.
It would have to be split into a "good bank", able to resume its role as a robust lender to businesses and families, and a "bad bank" saddled with the worst debts. Achieving it would be complicated but the challenge was "not beyond the wit of man", he said.
The Governor told MPs and peers on the Banking Standards Commission: "The whole idea of a bank being 82%-owned by the taxpayer, run at arms' length from the Government, is nonsense.
"It cannot make any sense. It would be much better to accept that it should have been a temporary period of ownership, to restructure the bank and put it back. The longer this has gone on the more difficult it has become to return RBS to the market."
His strongly worded comments will pile pressure on the Chancellor, George Osborne, to find a way of returning RBS to the private sector over four years after it had to be rescued by Gordon Brown at the height of the banking crisis in October 2008.
RBS, which also owns NatWest, was then hours away from collapsing and triggering a crisis that could have paralysed Britain's entire banking system. Sir Mervyn told the Commission that still heavily loss-making RBS urgently needed to be restructured. He added: "This has dragged on unnecessarily long."
"It's four-and-a-half years on and there is no immediate sign of RBS going back to the private sector. So I think that means we have not been sufficiently decisive in either recapitalising the banks or restructuring them."
He warned that this would temporarily damage the already fragile public finances by realising losses on the huge portfolio of debts RBS took on under the leadership of Fred Goodwin. But he insisted it's a price worth paying.
Government strategy is to let RBS bosses repair its shattered balance sheet and sell the whole bank back to the private sector. But its share price is still well below the level at which the bank was rescued, meaning taxpayers face a multi-billion-pound loss.