UK says RBS to remain at arm's length from government

LONDON (Reuters) - Royal Bank of Scotland will continue as a major commercial player in the UK banking sector without government interference, Prime Minister David Cameron's spokesman said on Wednesday.

The government owns 82 percent of RBS after rescuing it from collapse during the 2008 financial crisis and ministers are under pressure to lean on the bank to boost lending as well as at least break even on the bailout, although there are doubts over whether that is possible.

Business Secretary Vince Cable has suggested the government should split the bank to create an operation for lending to small and medium-sized businesses. Cameron's spokesman told reporters the government had no plans to change its approach.

"The current plan envisages significant restructuring of RBS and quite a lot of that has already happened," he said.

"In future, RBS will continue to be a major UK bank but the majority of its business will be in the UK and it will be in personal and business banking.

"This is a bank that will be operated on a commercial basis at arm's length from government. We think that's the best way of ensuring that we get the taxpayers' money back."

Britain used about 45 billion pounds of taxpayers' money to rescue RBS. There has been some speculation that the government may be forced to cut its losses to ensure a quick sale of its stake in the bank, but officials indicate there is no rush.

Cable, in an internal government letter dated February 8, called for the government to split RBS to create a business bank dedicated to supporting a rebalancing of the economy by boosting lending to smaller companies and supporting exports.

Treasury officials have pointed out the pitfalls of buying up the remaining shares in RBS, arguing that such a move would have implications for Britain's fiscal position and credit rating as well as increasing political risks for investors.

The coalition government, in which Cable is a Liberal Democrat minister, is led by a large Conservative party that is ideologically opposed to interference in business and is currently slashing public spending to reduce the size of the state.

"We have a clear policy on RBS," Cameron's spokesman said. "The objective here is to clean the mess following the biggest bank bailout in history and ultimately to get the taxypayers' money back."

(Additional reporting by Fiona Shaikh; Editing by Hans-Juergen Peters)

Source: http://news.yahoo.com/rbs-remain-arms-length-government-pms-spokesman-113842745.html

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