GEORGE Osborne yesterday revealed he is putting unprecedented pressure on RBS to change its business model, pushing the lender to cut its US operations, shrink its investment banking arm and focus on UK household and business lending.
In the past the government has kept out of the day-to-day running of the bank, operating at arm’s length through UK Financial Investments (UKFI) to ensure the bank is managed along commercial lines.
But earlier this month the chancellor insisted the bank use its bonus pool to pay £300m in fines to US regulators, rather than taking money from any other source.
And yesterday he told MPs and peers he is making the bank more UK focused, altering previous plans to continue running US operations and a substantial investment bank.
“As the major shareholder, through UKFI, I have insisted RBS change its business model, shrinking its investment bank more than it previously wanted to, to make sure it becomes a UK-focused corporate and retail bank,” he told the parliamentary commission on banking standards.
“The bank has made considerable progress in becoming a retail bank with an investment bank supporting that, and there will be further progress announced this week,” he said, referring to RBS’ full-year results statement on Thursday.
RBS is widely expected to reveal plans to sell off at least part of the US bank Citizens, as well as proposals to shrink the investment operations.
Osborne added that he even wants some profitable investment bank activity to be closed to redeploy resources to retail banking.
RBS and UKFI did not comment.