What is all the fuss about RBS?

George Osborne and Ross McEwan significantly appeared together today. Photo: Alex Lentati/Evening Standard/PA Wire

The Chancellor has been talking today as if RBS is at the start of a significant transformation.

But looking though at what has actually been decided, it is hard to see that much significant change.

Many of the measures the new management will take, like selling off Citizens, its US Bank, and slimming down the investment bank were already planned, even though the former chief executive Stephen Hester had pushed against some of the ideas.

Indeed, one Westminster source said to me today, 'I wonder what this has all been about'.

Loans that have gone bad are not being removed from the bank, but moved into an 'internal bad bank' - a slightly different structure but still on the bank's balance sheet.

The bank is having to beef up its capital - its safety buffer in case things go wrong - but that's in response to the regulators tightening up the rules, and it's what many other banks like Barclays have also done.

And the bank's own admission that its lending record to small business has been poor is confirmation of what many have alleged for some time.

But it could be the end of the scratchy relationship between the bank we own and the Government.

RBS is to create an internal 'bad bank'. Credit: PA

George Osborne and Ross McEwan, the new chief executive, appeared together this morning as the announcements were made - something that never happened with Stephen Hester.

But it is not just about the two of them becoming new best friends. It also seems to be a power play.

McEwan didn't deny to me today, even though I asked three times, that the Treasury had used the threat of splitting up the bank as a bargaining chip to speed up some of the measures the Government wanted them to take. These included getting rid of the US Bank and sorting out small business lending.

Otherwise, ministers might have carved up the bank, cutting it down to size for good.

George Osborne has asserted the Treasury's authority over RBS. Credit: Nigel Roddis/PA Wire/

The Treasury has asserted authority over an institution that fought to keep its independence. It is also perhaps the end of the partial pretence that - with the taxpayer as its owner - RBS could ever have been permitted to make all its own decisions.

The idea that the bank was ever supposed to have been run at arm's length seems to have gone for good. But if RBS doesn't shape up, it's perfectly possible that George Osborne could end up regretting aligning its future so closely with his own.

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