Outgoing Bank of England Governor, Mervyn King, is advocating for the breakup of Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS), which is more than 80% controlled by the state after receiving a 45 billion pound bailout from the British government in 2008.

The Royal Bank of Scotland's logo is seen in central London

According to a report from the Wall Street Journal, King will be retiring in June after 10 years of service for the British central bank. He told the parliamentary committee evaluating the standards in banking that the government needs to structure RBS radically within a year, and he recommended splitting the bank into two – a healthy lender that can be sold to a private sector quickly, and a “bad bank” with undesirable loans and assets. He also said that taking full control of the bank is not necessary.

King said, “We should face up to it. It’s worth less than we thought and we should accept that and get back to finding a way to create a new Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS) that could be a major lender to the U.K. economy.”

On the other hand, U.K. Treasury chief George Osborne’s opinion contradicts the recommendation of the central bank governor. Osborne believed that breaking up the Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS) would face “very considerable obstacles”. His suggestion is to reduce the size of the bank’s balance sheet while focusing on improving Britain’s economy.

“Time has passed and aside from reducing the balance sheet, nothing has been achieved — we haven’t managed to get it into the private sector. It would be much better to accept that it should have been a temporary period only, and the longer this goes on, the more difficult it becomes,” explained King.

In a previous statement, Stephen Hester, chief executive officer of the Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS) said that the bank’s restructuring process is making progress and admitted that it would take time to regain public trust. According to him, RBS is in its final phase in the restructuring process and it would return to private ownership within the next few years. He emphasized that the repayment of its emergency liquidity loan from the government and central bank is improving.

However, King told the parliamentary commission that there is no immediate sign that RBS will return to the private sector. He said, “It’s 4½ years on and there is no immediate sign of [RBS] going back to the private sector. That means we have not been sufficiently decisive in either recapitalizing the bank or restructuring it.”

King pointed out that RBS problems have macroeconomic consequences and splitting it would not take more than a year. U.K. secretary of business supports breaking up RBS to boost Britain’s economic recovery.

The British government provided a £45.53 billion bailout for its 81% stake in the Royal Bank of Scotland Group plc (NYSE:RBS) (LON:RBS) (AMS:RBS).