UK lawmakers mulling option of RBS breakup: sources

Tue Jun 4, 2013 7:16am EDT
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By Matt Scuffham and Steve Slater

LONDON (Reuters) - Splitting up part-nationalized Royal Bank of Scotland (RBS) (RBS.L: Quote) will be put forward as an option by lawmakers examining standards in British banking, political and industry sources said on Tuesday.

The bank's division would allow its toxic assets to be grouped into a "bad bank" separate from its profitable business, freeing it to make the increased lending that the economy needs, but has been rejected so far since it could be complicated and expensive for the government to administer.

The sources said the Parliamentary Commission on Banking Standards is likely to lay out the pros and cons of such a move, but will stop short of making outright recommendations on the bank's future when it publishes its final report later in June.

Britain set up the cross-party commission last year to look at ethics in banking, after Barclays Plc (BARC.L: Quote) was fined over the manipulation of global interest rate benchmarks.

Some members of the commission, notably former British finance minister Nigel Lawson, are known to support hiving off RBS's toxic assets into a bad bank.

Yet the commission took little public evidence on the issue, making other members reluctant to make a firm recommendation on the matter.

Outgoing Bank of England governor Mervyn King brought the issue to the fore when he recommended a breakup of RBS in the last of the inquiry's 73 witness sessions.

RBS has already undergone a massive restructuring since the government pumped in 45.8 billion pounds ($70 billion) in 2008 to keep it afloat, leaving taxpayers with an 81 percent stake.   Continued...

A logo from a Royal Bank of Scotland (RBS) branch is seen reflected in a window in the City of London March 6, 2013. REUTERS/Toby Melville