LONDON Jan 21 Breaking up Royal Bank of
Scotland could make it easier to sell the part
state-owned British lender, a former Bank of England monetary
policy committee member said on Monday.
Adam Posen told lawmakers such a step would also boost
competition in a market dominated by RBS and three other big
lenders - Barclays, HSBC and Lloyds.
Britain owns 82 percent of RBS and has a 40 percent stake in
Lloyds. The government wants to return both to full private
ownership and make a profit for taxpayers.
"A clean investment bank or clean commercial bank may be an
easier thing to sell," Posen told a panel of lawmakers.
Posen said the authorities were assessing if the two banks
needed more capital, and whether there was a backlog of loans to
be hived off, perhaps into a "bad bank", as Ireland has done.
The lawmakers form a commission that will recommend
legislative changes around March to improve banking standards.
Andrew Haldane, the Bank of England's director of financial
stability, told the commission the central bank's Financial
Policy Committee saw a "need for action" at Lloyds and RBS.
"The two banks are both in a position that it would be
difficult for them to attract private capital without some
restructuring of their balance sheet," Haldane said.
What might emerge is a simpler, "somewhat slimmer good bank
purged of its bad assets or suspect assets" and perhaps
ringfenced with extra capital requirements, Haldane said.
He would not say whether a "bad bank" should be created to
make a sale of the "good bank" easier.
The FPC is due to discuss in coming weeks an assessment of
how much extra capital Lloyds, RBS and other banks may need.
Posen said regulators were still under pressure not to harm
large financial centres such as London. "There is some room for
big dumb rules, to limit the right of discretion on the part of