Sir Mervyn King, the outgoing governor of Bank of England (BoE), has called on the government to fully nationalise RBS and then split up the bank into ‘good’ and ‘bad’ to recover bulk of the £45bn used to bail out the state-controlled bank. The suggestion from Sie Mrvyn King came while he was speaking at the Parliamentary Commission on Banking Standards today. Describing the current scenario as nonsensical, the governor of Bank of England laid out his disagreement with Chancellor George Osborne over the future of RBS.
“The whole idea of a bank being 82% owned by the taxpayer, run at arms length from the government, is a nonsense. It cannot make any sense”, Sir Mervyn King said in a blunt testimony, adding, “I know it was put there for good reason as people don’t want politicians running banks but 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.”
Blasting RBS for having ‘achieved nothing’ in public ownership, Sir Mervyn King called on chief executive Stephen Hester to be more decisive on RBS restructuring plans. The outgoing governor said that RBS’ £5.2bn loss in 2012 has had a deep adverse effect on the UK economy, calling for it to be dealt with soon.
Labour party had created the current structure of UK Financial Investments to oversee the £45bn pumped into RBS and £20bn into Lloyds Banking Group during the 2008 banking crisis, which has been adopted by the coalition too. When asked by commission member Lord Lawson, a former conservative chancellor about why Chancellor Osborne did not consider RBS splitting, the Chancellor vehemently opposed the move saying that he would have to use up to “£8bn or £9bn” of taxpayer funds to take control of the rest of RBS. He told Lawson there were “very considerable obstacles” to nationalising RBS in a move that cleared the way for the bailed out banks, including Lloyds Banking Group, to last week insist they were on course for privatisation.