RBS will create internal ￡38bn 'Bad Bank'

However, he insisted the creation of a ￡38bn bad bank unit within RBS would help to accelerate the disposal of toxic assets.The chancellor also suggested that the previous strategy for RBS pursued by Stephen Hester, the former chief executive, was out of line with the government's aim of turning the bank into a straightforward retail and business bank.He said that under Ross McEwan, the new chief executive, the interests of the bank, Treasury and Bank of England were aligned "for the first time". George Osborne said today that ￡38bn of bad assets,alligator shear such as loans it does not expect to be repaid, will be ring-fenced an internal "bad bank."Mr Osborne also said that it was his "absolute determination" that the UK taxpayer would "hopefully and eventually" get the ￡46bn spent on the bank's bailout in 2008.

RBS remains 81% owned by the government following a ￡46bn bailout at the height of the financial crisis. This morning the bank announced a third-quarter pre-tax loss of ￡634m.The former governor Bank of England Mervyn King had recommend moving RBS's bad assets to a wholly separate bank that would be owned alligator shear 100 percent by the state.But Mr Osborne said the current head of the Bank of England Mark Carney supported the idea of ring fencing the assets within the bank in an area re-named RBS Capital Resolution Group.Speaking on BBC Radio Four's Today programme Mr Osborne said: "We are removing those mistakes of the past, if you like, putting them into a separate bad bank in RBS. They are being forced to sell of those assets much more quickly than they had to.

The chancellor added that the bank should never have become the "complex global mess that it eventually became."He said: "We've got to make RBS a much simpler bank that is supporting the British economy.""My absolute determination is to get back the money that the British taxpayer put in... Hopefully and eventually we will get our money back."RBS was criticised this morning for it's lending to small and medium businesses in a damning report commissioned by the bank from former skin analyzer deputy governor of the Bank of England Sir Andrew Large.Sir Andrew's report confirms that the bank was turning away too many businesses wanting finance and providing far less credit to small companies than it should be.RBS's new chief Ross McEwan told Radio Four's Today programme that the bank was currently "just too complicated for our customers to deal with" and must become "the most customer focused bank in the UK.
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