Banking Reform Commission, Government Clash On RBS Split Option
News: The head of the Parliamentary Commission on Banking Standards has urged the government to consider all options for bailed-out Royal Bank of Scotland (RBS), the Financial Times reports. Commission chair Andrew Tyrie wrote in the paper to argue that no options should be ruled out, including the splitting up of the Edinburgh-based lender into a 'bad' and 'good' bank. Mr Tyrie appeared to allude to opposition by some organisations and observers to a splitting up of RBS into a healthy bank that could be sold off and a toxic holding company that would remain in public hands. Mr Tyrie argued that such a plan would not increase the tax burden, impact public finances or be detrimental to the public sector's net worth.
BMI View: Although total UK banking sector assets continued to contract during the first five months of the year, the sudden upside macro surprises across the economy are a favourable development which will provide a modicum of support going forward. Moreover, we believe that recently inaugurated Bank of England Governor Mark Carney will look to intervene further on the monetary policy front, which will bolster liquidity in the industry, though admittedly this could come at the expense of flattening the yield curve.