RBS has spent too long in public hands and achieved very little, Sir Mervyn King argued yesterday, calling for the lender to be broken up and sold off in short order, in a direct and unprecedented attack on George Osborne’s handling of the bank.
The governor of the Bank of England told MPs and peers RBS is still performing so poorly that it is dragging down growth in the economy as a whole, meaning much more decisive action needs to be taken.
That is the direct opposite of the chancellor’s statements to the same committee last week in which he insisted the bank’s transformation is on track and that the lender should be making a much more positive contribution to the UK in the near future.
Sir Mervyn steered clear of criticising RBS’ chief executive Stephen Hester, saying the boss had “struggled manfully to reduce the balance sheet.”
“He was given a remit and has done a great deal to achieve that.”
But that remit was not moving the bank quickly enough in the right direction, Sir Mervyn said.
“This much more decisive restructuring should not take more than a year. Plenty of people around the world have done it, they need to be given the authority to take the necessary decisions and get it done here,” said the governor.
“This has dragged on for an unnecessarily long time. It is time to face reality – RBS is worth less than we thought. We need to find a way to get RBS back as a major lender to the British economy, as opposed to shrinking lending as it is now.”
Last week George Osborne came to the opposite conclusion, claiming breaking RBS up would be damaging to the taxpayer and delay its return to private.
He said it would take at least 18 months, plus billions of pounds more public money, to complete the process.
“You would at least have to weigh that against the current strategy, which is to take RBS and greatly reduce its assets, and reduce its ambition from being a global universal bank with a very large proportion of its business in investment banking, and get it much more focused as a UK corporate, SME and personal bank, with an investment bank to support that activity, rather than to be a rival to that activity,” he said. “The obstacles to [a break up] are considerable.”
RBS declined to comment, but insiders suggest the outgoing governor is trying to redefine his legacy as one of a man of action, using the last few months before his departure from the bank to improve his image.
At the time of the bank’s full-year results, RBS chief Stephen Hester said he hoped the bank will be in a good enough position for the government to be able to consider the options for privatisation as soon as next year.
RBS’ share price dipped 1.18 per cent on the day.
Natwest system crashes
THOUSANDS of Natwest and Royal Bank of Scotland customers were locked out of their accounts last night after their systems failed at around 9.30pm. Cash withdrawals, card payments, online and telephone banking were all affected, with some customers unable to pay for meals in restaurants or stranded at supermarket checkouts. In June 2012 a technical fault put many of the same RBS Group services out of action for a week, forcing the bank to open branches on a Sunday to make amends.