Break up RBS, says think tank

A NEW report claims RBS should be broken up into 130 locally-run banks when the government sells out.

The New Economics Foundation says if the policy had been implemented in 2008, an extra £10 billion a year would have flowed into the UK economy.

The report by the left-leaning think tank, published ahead of the bank reporting its results tomorrow, says there is “strong international evidence to support a public trust model of ownership” on the John Lewis model.

It says: “From the Royal Bank of Cornwall to Royal Bank of Bradford, the majority of new banks would have total assets of between £1-2bn, tapping into existing local identities and better serving the needs of regional economies.

“Nationally, the resulting boost to GDP would far outstrip the estimated £700m annual savings in interest payments that would result from using the estimated £40bn proceeds from privatisation to repay national debt.”

RBS has banked more than £45bn in public funds since it was bailed out in 2008, and the government retains an 80 per cent stake.

Chancellor George Osborne reaffirmed the government’s intention to privatise the bank in his 2013 Mansion House speech.

The NEF says the local model would increase lending to SMEs, improve the diversity and resilience of the UK banking system by protecting against future economic shocks, promote financial inclusion by reversing the trend of branch closures, and rebalance the economy by boosting regions outside London.

It claims a “mutual guarantee scheme”, and the combining of central and back office functions, would ensure both financial stability and efficiency.

The think tank’s head of finance and business Tony Greenham said: “Regardless of the bank’s performance this week, a hasty selloff is not in the public interest.”

Meanwhile RBS has not disputed a report that it is putting Rory Cullinan in charge of overseeing another scaling back of its investment bank.

Mr Cullinan, who already runs the internal ‘bad bank’ and is overseeing the disposal of its Citizens and Williams & Glyns businesses, will take over responsibility for RBS’s investment bank from Donald Workman, currently executive chairman for corporate and institutional banking.