Osborne to Decide RBS Split in November, Telegraph Says

Chancellor of the Exchequer George Osborne said the U.K. government will decide by early to mid-November whether it should break up Royal Bank of Scotland Group Plc and spin off its toxic assets into a “bad bank,” the Daily Telegraph reported.

Weighing the options for RBS is a “priority for the next two or three weeks,” Osborne said in an interview with the newspaper. “We are looking at the case for a bad bank, and if not a bad bank, what is the alternative strategy that really gets on top of the problems in that bank.”

The U.K. government in July hired Rothschild to help review the case for splitting off RBS’s bad assets into a separate legal entity, a proposal made by the Parliamentary Commission on Banking Standards in a June report. It subsequently hired BlackRock Inc. to value the bank’s assets. Osborne has ruled out injecting more taxpayer money into the 81 percent government-owned lender or raising the state’s stake.

The U.K. government won’t sell equity in RBS until after the next general election even as it prepares to sell shares in Lloyds Banking Group Plc, Osborne said, according to the Telegraph. Lloyds, 39 percent state-owned, is better placed for privatization than RBS, according to the June parliamentary report.

“We are now looking actively at a retail offer for the next tranche of Lloyds shares,” Osborne told the newspaper. “We are not, at the moment, close to the stage of being able to sell RBS shares.”

The newspaper said the government is examining three “bad bank” models for RBS’s toxic assets -- one run by an independent team within the company, one backed by the central bank and one as a separate taxpayer-supported unit.

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