Splitting up RBS ‘could boost lending’

Brokers believe splitting up the Royal Bank of Scotland into a “good” and “bad” bank could boost mortgage lending.

The Parliamentary Commission on Banking Standards has put further pressure on the Government to investigate whether RBS should be separated into a “good bank”, which could be sold off, and a “bad” bank which would be state-owned and contain all of its toxic assets.

Writing in the Financial Times last week, PCBS and Treasury select committee chairman called for the Government to examine a potential split “as a matter of urgency”.

He wrote: “No obstacles should be put in the way of a full examination of all aspects of such a split.”

Chancellor George Osborne has ordered a report this autumn on whether the bank could be split in two although reports state some RBS and Treasury officials are against the idea of a split and may try to sabotage it.

Chadney Bulgin mortgage partner Jonathan Clark says: “Potentially, getting rid of the bad assets could allow the good bank to borrow money at better rates and to lend more, so if that happens then it will be a good thing.”

Capital Fortune managing director Rob Killeen says: “The precedent has been set with Northern Rock being split into a good and bad bank, which seems like a good indication it could be successful when it comes to mortgage lending.

“However, in the banking sector it seems profits are being privatised while debt is being nationalised. If RBS is split, this will not sit well with the taxpayer.”

Northern Rock was split in October 2010. The “bad” bank, owned by the Government, repaid £1.9bn in the first half of 2013, bringing the total to £6.6bn. It still owes over £41bn.