In response to comments made today by Sir Mervyn King calling for the break-up of RBS, David Davis MP said:
“Mervyn King is entirely right to call for the splitting of RBS into a ‘good’ bank and a ‘bad’ bank. This is the right thing to do, along with a tightening of the accounting standards to ensure all banks recognise the potential losses which are hidden under the current accounting system. If the status quo is allowed continue, we risk replicating the problems in Japan, where zombie banks created a zombie economy.
This may of course lead to a need for some recapitalisation of the banks by a new capital injection at some point in the future. If so, so be it.”