Gov't demands RBS shrinks investment banking arm

Chancellor George Osborne has demanded the Royal Bank of Scotland (RBS) drastically scales back its investment banking arm, as he announced the government's backing for the Independent Commission on Banking's recommendations.

'We believe RBS's future is as a major UK bank, with the majority of its business in the UK and in personal, SME and corporate banking,' he said, arguing the bank would have to scale back its 'riskier activities that are heavy users of capital or funding.'

Osborne's comments follow a report in the Sunday Telegraph that RBS was considering the closure of more than half of its investment banking operations. It claimed 18,900 of the bank's Global Banking and Markets division had been warned of large-scale redundancies.