George Osborne "clear" on vision for RBS The future shape of Royal Bank of Scotland is one of the key questions following the surprise announcement that Stephen Hester, the man who had steered it through the stormy post-2008 years, is to step down. Next week George Osborne, chancellor, will use his Mansion House speech to set out his view of the future banking landscape in Britain. But his aides say he is already clear what sort of RBS he wants to see at the end of its transition. "It should be a UK and European commercial bank with an investment banking operation that supports its clients," said one Osborne ally. Meanwhile Sajid Javid, Treasury minister, told MPs on Thursday that the time had come for the bank to focus on supporting the British economy and businesses. But for all the rhetoric about entering the next phase in the RBS story, the message was unchanged. The government has long made it clear it wants the bank to focus on consumer and business lending in its domestic market, in particular to small and medium-sized businesses, by shrinking its investment banking operations and cleaning up its balance sheet. And for the most part, that is what has happened over the past five years. The group's portfolio of assets deemed "non core" - mainly riskier mortgage and commercial real estate lending - stood at £53bn at the end of March, down from over £250bn at the end of 2008. Its investment banking arm, expanded during the Fred Goodwin era, has been significantly pared back. All of which suggests that, rather than a question of strategy, it was the pace of change which proved the flashpoint between the government and Mr Hester. Ministers have always wanted Mr Hester to move faster in ridding the bank of its investment activities and US retail operations. Essentially RBS is a retail bank dealing with SMEs and he [Hester] is an investment banker. I think it went against the grain for him," said Lord Lawson, the former Conservative chancellor. First and foremost I think he was the wrong man for the job. Mr Hester himself alluded to a sense of stalemate this week when he spoke of being "in the trenches" during the RBS restructuring. And among the official praise being heaped on Mr Hester on Thursday, Mr Javid said that Mr Hester had "started to" refocus RBS, suggesting that ministers now wanted this to go further and faster. From here on it's about making the bank more profitable, but at the same time you need a greater level of credit demand Andrew Coombs, analyst at Citi Yet given RBS has already undergone one of the biggest corporate restructurings in history over the past five years, it is unclear what further and faster could mean in practice. The parliamentary commission on banking standards, an influential panel of MPs and peers, will next week publish a report urging the chancellor to consider options to reform RBS such as carving out bad assets into a "bad bank." A hypothetical structure mooted by analysts suggests a hived-off entity could include the remaining non-core assets and parts of Ulster Bank, the group's Irish subsidiary. While the commission's report could provide Mr Osborne with the perfect excuse for a more radical shake-up, analysts have questioned the wisdom of splitting RBS into "good" and "bad" banks, arguing it would be a fraught process. Another round of heavy restructuring, for example, could be constrained by stricter incoming European Commission rules on public support for lenders. "Surely the chancellor won't give any serious consideration to such proposals?" asked Ian Gordon, analyst at Investec Securities. Other options could be further nips and tucks to the investment banking business, or a push to float a greater chunk of Citizens, its US business, than the 25 per cent previously announced. But no option guarantees that the bank will achieve the definitive measures of success: sustainable profitability and reprivatisation. "From here on it's about making the bank more profitable, but at the same time you need a greater level of credit demand," said Andrew Coombs, analyst at Citi.