Nov 1 - The Royal Bank of Scotland will create an internal ''bad bank'' to fence off its riskiest assets. It's part of a series of measures intended to speed up the sale of the government's stake and restore confidence in the lender. But, as Joanna Partridge reports, some believe the restructuring is just a ''cosmetic exercise''.
Trying to regain the public's trust and get ready for re-privatisation. Britain's Royal Bank of Scotland has announced a series of measures aimed at making it easier for the government to sell its stake sooner. RBS will create an internal "bad bank" - for its riskiest assets, worth 38 billion pounds. The government could have ordered a break-up of the bank instead. The move frees up 10 and 11 billion pounds of capital. It's one of the first steps taken by new CEO Ross McEwan. He denies it was just a PR stunt. SOUNDBITE: Ross McEwan, RBS CEO, saying (English): "It's given a good perspective on the business and what we should do with it going forward. And for me as the new CEO, first month into the job, being able to examine the business in that sort of detail, in such a short period of time and now to be able to focus all of my attention and my executive attention on to our customers." McEwan visited a small business with Britain's Finance Minister George Osborne on Friday. He hopes the restructuring will improve relations with the Treasury - which owns 81% since bailing it out at the height of the financial crisis. SOUNDBITE: George Osborne, British Finance Minister, saying (English): "By dealing with the toxic assets of the past, by making sure it is focussed on the UK, and making sure it's the best small business bank, so it can support businesses like this. In other words, RBS should be a boost to the British economy and not a burden." Britain's financial watchdog wants banks to hold more capital, making it more important to sell bad assets. RBS is speeding up the pace of running down its bad assets - getting rid of up to 70% in two years. That will increase its losses on those loans, says Alastair McCaig from IG. SOUNDBITE: Alastair McCaig, IG, saying (English): "We're likely to see quite a bit of painful announcements in the next couple of years as far as their quarterly and annual figures are concerned which will make some pretty poor headlines you'd imagine. Certainly these third quarter figures have seen a pretax loss of 634 million, it's likely the fourth quarter losses are probably going to come into the billions. 4 to 4 and a half billion. And that makes for a considerably less appealing proposition as far as investors are concerned." Market reaction to its plans only illustrated that - RBS was one of the biggest fallers on the FTSE100 on Friday. The bank wants to draw a line under its past. But restructuring is just the latest step on the path to recovery.