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Don't bank on Commission support for RBS split

Taxpayer-backed RBS could be split into two separate banks. Photo: PA

Reports this morning suggest that the Parliamentary Banking Commission on Standards is likely to recommend splitting up RBS into a "good bank" and a "bad bank", as suggested by the Governor of the Bank of England, Sir Mervyn King, when he appeared at the Commission back in March.

That would be tricky for the government, which does not believe this is a policy worth pursuing - too expensive, too late, and it makes selling off the bank much harder, putting a tasty handout to the public at risk, it worries.

But it may well not come to pass. It is the case that the chairman Andrew Tyrie's draft of the Commission's 600-page report does talk warmly of the split as a possible solution.

But it is not presented as the only compelling solution. More to the point, by no means is there yet a consensus on the Commission to back this plan. And alongside the draft report there is an appendix on what the costs of the split would be to the taxpayer: leaving us with a "bad bank" would run into billions.

Indeed, despite the fact it has sat for weeks and heard hours and hours of evidence, the Commission only heard evidence on a potential split of RBS from - you guessed it - Sir Mervyn King.

The group was convened to look at culture and standards in the banking industry after the Libor scandal, not to ponder the future structure of RBS.

Senior executives at the bank have expressed their frustration to me at the Governor's position, not least that repeated interventions make it harder for them to get on with the mammoth job of sorting out the bank, the lion's share of which is now more or less complete.

They still have around £50bn of less-than-savoury assets on their books, but they have got rid of hundreds and hundreds of billions.

But now there is likely to be frustration among the Banking Commission who have not yet agreed their position, and have not yet discussed what they want to recommend on RBS.

And members may perhaps be unhappy that the Governor's view, which does have support among some of the Committee, appears to have been accepted without taking evidence from others on the subject.

It would not be the first time that ideas are mysteriously circulated in public in the hope that others can be bounced into supporting them.

But the Commission meets next week to work out what they are actually going to say. Will they actually wholeheartedly recommend split and sell for RBS? Don't bank on it.