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RBS: "good bank, bad bank"

RBS should be split up, says Mervyn King.

Bank of England governor Mervyn King has said that the arguments for restructuring  RBS are strong.

He said that the bank had two arms - a healthy one and an unhealthy one - and that there was a case for splitting them.

He said in a statement:

The whole idea of a bank being 82%-owned by the taxpayer, run at arms' length from the government, is a nonsense. It cannot make any sense.

I think it would be much better to accept that it should have been a temporary period of ownership only, to restructure the bank and put it back. The longer this has gone on the more difficult that's become" to return RBS to the market.

RBS is 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.

It's four-and-a-half years on (since RBS's rescue) and there is no immediate sign of it going back to the private sector. So I think that means that we have not been sufficiently decisive in either recapitalising the banks or restructuring them.