Commission wants urgent consideration of RBS split

Radical plans to split Royal Bank of Scotland (RBS) into a “good” bank and a “bad” bank must be looked at immediately as part of an urgent rethink of Government plans for privatisation, according to an influential Parliamentary commission.

In its final report, the Commission on Banking Standards stopped short of recommending a full break-up of RBS, but said the option must be considered as it warned current plans to return RBS to the private sector risked being “insufficient”.

The Government also came under heavy fire for “political interference” in RBS and fellow state-backed lender Lloyds Banking Group, with the report calling for the body in charge of managing the taxpayer stakes to be scrapped.

The recommendations come as part of wide-ranging proposals to shake up the banking sector in the wake of recent scandals, including jail terms for unscrupulous bankers and a new professional code of conduct.

Excessive pay practices and rewards for failure must also be stamped out, with regulators given the power to defer bonuses for 10 years, according to the report.