UK Banking Commission Findings 'May Be Ignored'
John McFall, the outspoken member of Britain's upper house of parliament who described bank bosses as being "asleep at the wheel", has warned that proposals for the break-up of Royal Bank of Scotland (RBS) could be swept aside by the chancellor.
McFall, who is a member of the Parliamentary Commission on Banking Standards, told CNBC on Thursday that although he hoped George Osborne would listen to the Commission, the British chancellor might not like being dictated to.
"We'd hope (the chancellor will) follow our recommendations, given he set it up. But I have been in Parliament an awful long time and I have seen chancellors' wayward ways after being told what to do. They don't like being told what to do," he said. "But the aim was to have a cross-party Commission to come out with this report so I hope he takes it seriously."
The Commission is yet to publish its final findings, and McFall would not comment directly on what it would say, but it is likely to lay out a detailed case for the break-up of RBS into a good bank and a bad bank, according to press reports.
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McFall said he had long advocated a good bad/bank division, writing about the strategy as far back as 2009, but he admitted the arguments against such a move were credible. People like RBS CEO Stephen Hester could suggest the bank was already operating such a model internally, he added.
"This is a very complex issue. And we want to ensure the financial system is running as smoothly as possible. There are still possible problems in euro zone and elsewhere globally, and if they hit us at a time when there is a disruption to the banking system - by a good bank/bad bank for example – that could be a problem," he said.
Both Osborne and Prime Minister David Cameron are thought to be against breaking up the bank, which would delay plans for its privatization.
RBS, which is 81 percent taxpayer owned, is languishing way below its value at the time of its 45 billion pound ($70 billion) bailout five years ago. The government's break-even point is 500p per share, but on Thursday they closed at 322p.
McFall, who used to chair the Treasury Select Committee, also said that it was not the financial architecture that caused many of the U.K.'s problems, but the individuals in charge – something he did not realize at the time of the financial crisis.
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