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March 7, 2013

U.K. Bank Chief Calls for RBS Split

Departing Bank of England Gov. Mervyn King called for state-controlled lender Royal Bank of Scotland Group PLC to be split in two, a move that sets the stage for a clash with U.K. Treasury chief George Osborne and underscores policy makers’ growing frustration in the face of a weak economy.

Mr. King, who retires in June after 10 years at the helm of the U.K. central bank, told a parliamentary commission examining standards in banking that he favors splitting RBS into a healthy lender that can be sold back to the private sector quickly and a “bad bank” stuffed with RBS’s souring loans and other undesirable assets. Fully nationalizing RBS, 81%-owned by taxpayers, might not be necessary, Mr. King said, though he didn’t elaborate.

The BOE governor called it “a nonsense” that the government is officially managing its stake in RBS at arms length through a body called UK Financial Investments Ltd., and instead urged ministers to use the lender as a vehicle to fuel the economy with loans to businesses and consumers.”

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Read full Wall Street Journal article here

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