Business World

Saturday 23 September 2017

Plans to split RBS into 'good' and 'bad' banks look doomed

Sarah McCabe

Sarah McCabe

THE British government will probably reject a proposed split of Royal Bank of Scotland into "good" and "bad" divisions in as little as seven days – but Ulster Bank alone could still be separated from its parent.

According to the UK's 'Independent on Sunday', the British government will unveil its decision on whether to split the troubled parent of Ulster Bank shortly after the British Conservative Party's annual conference next Sunday.

The decision will be based on the findings of a review commissioned by the UK government, which is expected to reject the proposed carving up of RBS. The findings were expected earlier this month, but were delayed because of the size of the undertaking.

But despite the fact that a "good" and "bad" split now looks unlikely, Ulster Bank's fate is still not clear – the report could still recommend "hiving off" the Irish business, in an effort to appease senior members of the Parliamentary Commission on Banking Standards.

Stake

The commission and other fans of the idea believe that carving up RBS would speed up its return to health and allow the government to sell its 81pc stake in the lender more quickly. The commission's chairman sent a public message to the British government last month, reflecting fears that the split would not go through.

This latest nail in the coffin for the proposed split follows Fitch Ratings' announcement last month that splitting and fully nationalising the bank's toxic assets could pile more debt on to the state.

Shareholders in RBS were also thought to be plotting to block a break-up of the bank, believing that most of the hard work aimed at dealing with the legacy of disgraced former boss Fred Goodwin is done.

Meanwhile, RBS is also close to deciding who to sell a package of 315 branches to. It had been leaning toward a consortium led by private equity fund Corsair, but is thought to be reconsidering after W&G Investments made a new bid.

The bank is being forced by the European Commission to sell the branches, one of the terms of its £45.5bn (€54bn) bailout.

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