Chancellor George Osborne must face up to taxpayer losses in Royal Bank of Scotland and accelerate plans to return the bank to the private sector, says Bank of England Governor Sir Mervyn King.
The central Bank boss told MPs the Government had failed to take decisive action to overhaul RBS and needed to complete a radical restructure of the bank to create a healthy lender within a year.
He said RBS was holding the wider economy back, but added it was “not beyond the wit of man” to split RBS into a ‘good’ and ‘bad’ bank to ensure the cleaned-up group could support lending and boost economic recovery efforts.
“The lessons of history is that we should face up to it – it’s worth less than we thought and we should accept that and get back to finding a way to create a new RBS that could be a major lender to the UK economy,” he said.
Sir Mervyn’s comments will come as a blow after RBS boss Stephen Hester last week insisted the bank’s return to the private sector was on track and could be completed within two years.