Chancellor Osborne to decide on to retain or break up RBS

By Marc Castro

Oct 19, 2013 11:54 AM EDT

The Chancellor of the Exchequer, George Oborne, had said the UK government would be deciding by early to mid November if it should break up with Royal Bank of Scotland Group Plc. The plan is to spin off its bad assets into a 'bad bank', as reported by the Daily Telegraph.

Osborne said in an interview with the newspaper, "Weighing the options for RBS is a 'priority for the next two or three weeks. 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."

Last July, the UK government had hired Rothschild to review the options in splitting off RBS's bad assets into a separate entity. This was a proposal made by the Parliamentary Commission on Banking Standards in its report last June. BlackRock was also hired to evaluate the bank's assets. For the government, Osborne had ruled out infusing more taxpayer money into the government owned lender or in raising the stake of the UK government.

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

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