Hester: RBS is close to being a 'recovered' bank

The chief executive of part-nationalised Royal Bank of Scotland says it is nearing the point of becoming "recovered" and will complete a major restructuring by next year.

The bank, which is 81 per cent-owned by the taxpayer following its near-collapse in 2008, has been selling businesses and scaling back its investment-banking operation in a bid to become profitable once again. At a banking and insurance conference in London, chief executive Stephen Hester gave his most upbeat assessment yet of the bank's prospects.

"RBS is nearing the point of becoming a recovered bank and well on the way to being a good bank," Mr Hester said. "I hope by 2013 the restructuring phase should be largely complete and I hope that our ongoing businesses should be largely retooled and performing at least in line with competitors, with robust, enduring and valuable franchises at that point."

But he was clear that the bank was not yet completely out of the woods, with the UK economy mired in recession. "There are important execution challenges to get to this recovered bank status still remaining," he said.

One of these seems to be the potential fallout from the Libor-fixing scandal, over which the bank is being investigated.

Mr Hester said: "We have to accept that the pendulum has swung, that society has a different attitude and determination to make sure that banks behave in a different way and improve their reputation.

"We have to all deal with the issues from the past and reduce the chance of them recurring. That will take a lot of time and sadly a lot of money as well, in terms of past restitution, I suspect."

RBS is likely to be one of the chief beneficiaries of the Bank of England's Funding for Lending scheme, designed to help banks and building societies lend more to business and individuals.

Paul Fisher, the key Bank of England rate-setter, yesterday revealed details of the scheme. He said 13 banks and building societies – 73 per cent of the lending market – had signed up.

Under the Funding for Lending scheme banks will pay a minimum fee of 0.25 per cent of the amount borrowed, provided they maintain lending levels or increase them.