Ulster Bank's future as an integral part of RBS has again been called into question after MPs piled further pressure on George Osborne to consider splitting the parent company into a good and bad bank.
In a letter to the Financial Times, Andrew Tyrie, who chairs the cross-party Commission on Banking Standards (CBS), backed the Chancellor's inquiry designed to find out whether a split would help RBS boost lending.
Mr Osborne demanded a report on the issue, due for release in the autumn, at the prompting of the commission, whose letter is seen as a means of dampening suggestions by analysts that a split is too unwieldy and unlikely to give a significant boost to the bank.
And Mr Tyrie said worries that taking on RBS's bad debt would unbalance the economy were unfounded.
"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," he said.
The letter said the report should in fact look at whether the taxpayer should be better off as the 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."
Hiving off Ulster Bank, which is still dealing with impairment charges from the property boom and bust across Ireland, had been mooted as a solution but the Financial Times quoted bankers as saying that a more likely scenario was to place Ulster Bank in its non-core division. That way, it could be organised into an internal "bad bank".
Such a scenario seemed unlikely with chief executive Stephen Hestor in charge.
He has said previously that Ulster Bank would remain in the core part of the business, but with his departure that could change.
€387m - The operating losses reported by Ulster Bank this year