Good bank, bad bank? Wrong and a distraction says the CBI

John Cridland of the CBI said the idea of splitting up RBS is outdated, unhelpful and a distraction. Photo: Johnny Green/PA Wire

The idea of splitting up RBS is outdated, unhelpful and a distraction, the boss of the CBI has told ITV News.

The Banking Commission is meeting today to start thrashing out the conclusions of its report, with several powerful members pushing the idea suggested by the Governor of the Bank of England of creating a "good bank" and "bad bank".

But John Cridland said the idea is not the "right solution", adding, "Constant restructuring, constant rebuilding of what a bank looks like, that produces uncertainty, and I don't think that would be helpful to the bank or the businesses that depend on the bank".

He cautioned the Banking Commission against recommending the idea. Mr Cridland said, "It surprises me that some part of the Banking Commission is still talking about this issue because it does feel to have been yesterday's debate".

CBI Director-General John Cridland. Credit: Sean Dempsey/PA Wire

He continued: "It's not obvious to me why it needs to split between a good bank and a bad bank. Those issues were running very hot at the height of the financial crisis in 2009, but RBS is four years into a major restructuring programme which has dealt with many of the issues. It seems to me the good bank, bad bank idea is rather outdated.

"I would be surprised personally if the Banking Commission did suggest this, because it doesn't feel to me to be the right solution for the challenges state-owned banks are currently facing. The key issue is getting them back to the market and getting the best price for the taxpayer".

He went on to say, "This restructuring of banks between good banks and bad banks does feel to me somewhat of a distraction".

The Banking Commission is expected to report in the next fortnight.

With the CBI now agreeing with the Treasury that "split and sell" would be a backwards step for the bank we all own, it will be fascinating to see how the Commission, which is divided on the issue, will be able to agree.