In front of the Banking Commission this morning, Sir Mervyn King has left MP s in little doubt that he believes the time is well past for the current structure of RBS to be put out of its misery. In very strong language - for a central banker at least - he has made clear that he thinks the best solution for RBS now is not to carry on trying to fix its problems but something more radical. In a nutshell, the Governor thinks the best way forward is to break up RBS into a good and a bad bank. The taxpayer would take a hit on the bad bank, chockablock with a balance sheet full of holes that will never be fixed. But the healthy bit could be sold back to the market much sooner rather than later.
This is entirely at odds with the approach that has been taken so far, where RBS has been trying essentially to fix the whole thing - what Stephen Hester the boss describes as making safe the 'ticking time bomb'. But Sir Mervyn appears to believe that other than reducing risky lending, under that approach RBS has in his words "achieved nothing" since 2010. And he makes clear the view of split and sell is something he has advocated to the Chancellor. He said, it is "fair to assume" they discuss this option, and suggests he is frustrated that George Osborne hasn't faced up to this because of a fear of "presentational problems" if the taxpayer had to take a hit on losses.
In pretty bold language he says:
The whole idea of a bank being 82 percent owned by the taxpayer, run at arms' length from the government, is a nonsense. It cannot make any sense. I know it was put there for good reason. People didn't want politicians running banks. But I think it would be much better to accept that it should have been a temporary period of ownership only - to restructure the bank and put it back. The longer this has gone on the more difficult that's become.
Both the government and the Bank are pursuing a very different strategy to try to make all of the bank we own safe, and then start selling the shares back. But as Sir Mervyn moves towards the exit, I wonder if they will listen? We also don't know yet what the new Governor of the Bank thinks - a question it would be fascinating to answer.