Belfast Telegraph

Bank split 'inappropriate', claims former boss of RBS

By Daniel Bentley

A former chief executive of Royal Bank of Scotland has dismissed suggestions the institution could be broken up as "totally inappropriate".

Sir George Mathewson said banks needed instead to concentrate on re-establishing trust with customers and small businesses in the wake of the financial crisis.

Business Secretary Vince Cable has suggested majority state-owned RBS should be split up with part of it being turned into a "British business bank".

In a leaked letter to Prime Minister David Cameron and Deputy Prime Minister Nick Clegg, Mr Cable said it should be given a clean balance sheet and "a mandate to expand lending rapidly to sound business".

But Sir George, predecessor to disgraced former RBS chief executive Fred Goodwin, told the BBC Radio 4 Today programme: "I think that would be totally inappropriate. I do think that to break up the major provider of funds to our existing small businesses is not the correct way to react to this issue.

"I think we should all work harder at getting the relationship correct between bankers and the customers."

Sir George said there had been a breakdown in trust between the banks and businesses, who complain that they cannot get the necessary finance to expand their operations.

The relationship between corporates and smaller businesses and the banks has changed radically over the last few years and the climate of trust that existed before has reduced markedly, he claimed.

In his letter, Mr Cable wrote: "My suggestion is that we recognise that RBS will not return to the market in its current shape and use its time as ward of state to carve out of it a British business bank with a clean balance sheet and a mandate to expand lending rapidly to sound business."

The suggestion could cause friction with the Treasury, which is believed to support putting the bank back into private hands as quickly as possible.

Last night, Mr Cable insisted he had merely been "floating an option" in the letter.

"There is a real problem with funding SMEs (small and medium enterprises)," he said.

"The particular initiative the Government is taking at the moment is the so-called credit-easing initiative. The Chancellor will set out all the details of that in the Budget."