RBS chief welcomes inquiry to consider breaking up big banks

Stephen Hester described the decision to set up an Independent Commission on Banking (IBC) as a sensible move but said he believed customers, rather than the Government, should decide the size and type of Britain's banks.

The IBC is to consider radical options such as forcing the UK's big banks to divest assets in order to improve competition. It has stressed it has not settled on any options at this stage but chairman Sir John Vickers said "hard questions" needed to be asked.

Set up in June to look at financial stability and competition, the IBC said the financial crisis and subsequent merger of Lloyds and HBOS had reduced the number of players in the banking sector and current European Commission requirements for the part-nationalised Lloyds and Royal Bank of Scotland (RBS) to offload branches and assets could "go further".

One option would be for the Government to use its stakes in the taxpayer-backed banks to improve competition, while another is the controversial issue of separating investment and retail banking operations.

Speaking during a visit to Leeds, Mr Hester said: "It is right that the commission should consider a broad range of things.

"We will participate in that and try and help them reach whatever the right answers are for the UK, within the context of the broader world in which financial services needs to live."

Asked whether he believed in splitting up banks. Mr Hester said: "I believe in choice for the customers. Customers should be able to choose small banks, or big banks, banks that offer a broad range of services or banks that offer a narrow range of services. I don't think some Government department should make that decision for them. We should let customers decide who they want to deal with. I don't see that as a job for Government."

He added: "I am very clear that banks made mistakes and important reform is needed. I'm also clear that banks were only part of the problem. Those who say this was a problem caused by the banks are simply wrong."

Earlier this month, RBS, which is 83 per cent owned by the taxpayer, unveiled plans to axe over 1,000 jobs in Yorkshire as part of a nationwide cull of 3,500 roles. Offices in Harrogate, Leeds and Bradford will close.

When asked if there would be further job cuts in Yorkshire, Mr Hester said: "I hope the things that have been announced represent the bulk of the difficult things we have to do. Of-course, I'm not a fortune teller so I don't know what other bumps in the road there will be ahead. But that's what our intent has been."

The IBC has until September 2011 to report back.

Read more about Stephen Hester's plans for the Royal Bank of Scotland in Business Tuesday.