Britain will examine whether to break up Royal Bank of Scotland (RBS), finance minister George Osborne said on Wednesday, after acknowledging its re-privatisation remains a long way off.
RBS, still lumbered with toxic loans from a boom-era property binge in the UK and Ireland and buffeted by its role in a global interest rate-fixing scandal, remains a thorn in the side of the government and the wider struggling economy.
Osborne said RBS probably should have been split into a good bank and its soured assets hived off into a so-called "bad bank" in 2008 when the lender was close to collapse, despite previously dismissing this idea as too costly and disruptive. Similar "bad bank" solutions in Ireland and Spain triggered large losses that the state had to fill.
The government is keen to show Britain's part-nationalised banks are recovering from the 2008 financial crisis and a profitable sale of part of its 39% stake in Lloyds Banking Group would allow it to claim at least partial success ahead of the 2015 elections.