The Governor of the Bank of England, Mervyn King has today said that he believes the current arrangement, where the UK Government’s 82pc stake in RBS (parent of Ulster Bank) is managed at arm’s length, is a “nonsense”.

Speaking at the Parliamentary Commission on Banking Standards, Mr. King said the UK government should “divide RBS into a bank capable of lending to the real economy” and one that is held by the state and run down over time. “In that respect, it is a good bank bad bank split.”

He said the restructuring of RBS, which was nationalised with £45bn of taxpayer money in 2008 and 2009, had “dragged on unnecessarily long”.

The Governor did not stop with his attack on RBS and went on to say that all UK banks needed to restructure and recapitalise. “What will happen to lending will depend on how we resolve the underlying balance sheet problems of some of the UK’s biggest lenders”