James Moore: George Osborne probably won't even have to play a shot to keep out RBS googly

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The Independent Online

Outlook Is the Parliamentary Commission on Banking Standards planning to bowl another googly at George Osborne? Andrew Tyrie and his colleagues have already proven themselves more than willing to make life extremely uncomfortable for the Chancellor and the Treasury.

When he appointed its members Mr Osborne didn't want, or expect, the commission to be quite as independent as it has proved to be.

He's already been forced to agree to a number of radical policies, such as giving regulators the power to break up banks which try to chip away at the ringfence around retail banking operations erected by the earlier Independent Commission on Banking chaired by Sir John Vickers.

Now it appears that early drafts of the hotly anticipated final report of Mr Tyrie's commission contain an even more uncomfortable demand: that Royal Bank of Scotland should be broken up.

In a sense, this shouldn't come as a big surprise. Anyone who has cared to listen in on its sessions (as I have) will be aware that some form of break up enjoys the support of both Lord Lawson and the Archbishop of Canterbury.

The idea has the backing of the outgoing Governor of the Bank of England, Sir Mervyn King, too.

Such a recommendation would present a real dilemma for the Government, which would be faced with the choice of either brushing aside a commission it set up or seeing its hopes of starting to sell the taxpayer's stake in RBS before the next election dashed.

Fortuitously, however, a larger group of commissioners, including Mr Tyrie, are more in favour of conducting a cost benefit analysis before embarking on such a radical step. This is likely to win the day, and provide the Chancellor with an out.

To conduct such a review he would need to hire either an investment bank, or an accountancy firm, and perhaps both. Such organisations would be only too keen to give the appearance of fulfilling this task with exceptional rigour. They'd assign their very best staff, and charge their very best fee.

And, while they'd no doubt thoroughly investigate the options of a break up, they'd ultimately decide the costs of the various possible break up scenarios significantly outweigh the benefits of selling the thing off and having done with it.

Now then, Chancellor, about the firms you'd like to advise you on privatisation options... We've got some frightfully good people you know.

The City's reaction told its own story yesterday. Royal Bank shares enjoyed a modest gain, very much in line with the performance of the other big banks, and nothing like the performance you might expect from an institution in imminent danger of being ripped to bits.