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Osborne's Plan For Bailed Out Banks

posted 20 Jun 2013, 07:23 by Mpelembe   [ updated 20 Jun 2013, 07:23 ]


Reuters Business  Report - In his annual address to London's financial elite, Osborne said RBS probably should have been split into a good bank and its soured assets hived off into a so-called "bad bank" in 2008 when the lender was close to collapse.

Royal Bank of Scotland, still lumbered with toxic loans from a boom-era property binge in the UK and Ireland and buffeted by its role in a global interest rate-fixing scandal, remains a thorn in the side of the government and the wider economy, which is struggling to recover.

Osborne had previously dismissed splitting up RBS as too costly and disruptive. Similar "bad bank" solutions in Ireland and Spain triggered large losses that the state had to fill.

His decision to investigate a restructuring of RBS comes after a parliamentary commission he appointed to look at the UK banking industry recommended such an analysis earlier on Wednesday.

Mervyn King, the outgoing governor of the Bank of England, and Nigel Lawson, a former finance minister and fellow Conservative party member, also have urged a breakup to hasten the privatisation of RBS.

Delivering his final speech just after Osborne at the Mansion House, King welcomed the government's plans but said more needed to be done to restore Britain's banking system to full health.