Report vindicates Osborne vision for RBS George Osborne seemed a relieved man on Friday: he claimed that, for the first time since the financial crash of 2008, all the key players with an interest in Royal Bank of Scotland were on the same page. It took the sacking - in effect - of the Royal Bank of Scotland chief executive, the departure of the Bank of England governor and an expensive report into a possible "bad bank" split, but Mr Osborne got there in the end. The reboot of RBS has its origins at the end of a statement on banking reform given to MPs by Mr Osborne in December 2011: the moment the chancellor in effect took personal charge of the bank's future. Forsaking his usual "hands off" pretence over his role at the 81 per cent state-owned bank, Mr Osborne said he wanted to see RBS emerge as "a stronger, safer bank" ready to return to the private sector. In a shot across the bows of Stephen Hester, the RBS chief executive, he added: "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." Ministers - particularly Vince Cable, business secretary - thought the investment banker did not show enough relish for retail banking or for scaling back its operations in the US and in investment banking. "He was a block to reform," one minister said. Mr Hester eventually departed in June 2013. Although Mr Osborne paid tribute to his repair job on the bank, there was quiet relief in Whitehall. Mr Cable will feel his antipathy towards the former chief executive was justified, following Sir Andrew Large's scathing report, delivered on Friday, on RBS's treatment of its business customers. If Mr Hester's replacement with retail banker Ross McEwan represented one piece of the jigsaw; the replacement of Sir Mervyn King with Mark Carney as Bank of England governor on July 1 was another key moment. In his final days in the job, the former governor - increasingly exasperated by RBS's baleful position in the British banking scene - had become a vocal advocate of splitting the bank into a good and bad bank to speed its recovery. "We have not been sufficiently decisive in either recapitalising the banks or restructuring them," the governor told Andrew Tyrie's cross-party parliamentary banking commission in March. That put him at loggerheads with Mr Osborne who acknowledged there had probably been a case for splitting RBS when it was nationalised in 2008 but who had serious misgivings about starting such an upheaval. The chancellor had given MPs a long list of why a bad bank split would be problematic. Not only had Mr Hester shed much of the bank's toxic legacy, but a split would be time-consuming and require EU state aid approval. The internal good bank-bad bank split announced today simply changes the name plate on what was already happening Pat McFadden, a Labour member of the Tyrie commission For some, the exercise achieved little. Pat McFadden, a Labour member of the Tyrie commission said: "The internal good bank-bad bank split announced today simply changes the name plate on what was already happening." But Sir Mervyn (now Lord) King had powerful supporters, notably in the form of Justin Welby, the Archbishop of Canterbury, and Lord Lawson, the former Tory chancellor, who both sat on the Tyrie commission. The Tyrie commission recommended that Mr Osborne conduct an inquiry into the pros and cons of a bad bank split, even though the issue had barely figured in his inquiry. "Andrew wanted a headline for the report," one commission member said. In spite of his doubts, Mr Osborne invited Rothschild, BlackRock and Slaughter and May to carry out the inquiry, which concluded on Friday, that an external, taxpayer-funded bad bank was not justified. The final bill for this work has yet to be submitted but it will not come cheap. Nevertheless, Mr Tyrie and the Treasury insist the process was worthwhile, opening up a debate on RBS's dismal record of business lending, and creating a new focus on a three-year disposal plan for bad assets. Mr Osborne is now eyeing a reprivatisation of the bank some time after the next election, fortified by his belief that for the first time since 2008, RBS, the BoE and the Treasury can agree on the way ahead. Investors warn on sale as shares plunge Investors warned that the government will have to push the sale of Royal Bank of Scotland further back after the share price plunged after forecasts of big full-year losses and write downs, writes David Oakley. One top 10 investor in RBS said: "The numbers are disappointing. It is now completely unrealistic to expect the government to try and sell their stake before the 2015 election. A sale may be pushed back a long time after the election. Another top 20 investor said: "We shouldn't get too dispirited by this as it is a thin market and shares can drop dramatically on just a few trades, but it is a sign that the government may struggle to sell its stake any time soon." Shares in RBS dropped 7.13 per cent to 341.4p, one of the biggest daily falls of the year, as investors worried over warnings of predicted full-year losses of nearly £40bn and expectations that £4.5bn of write downs would be logged in the fourth quarter. It is also significant that the share price has fallen well below the 407p level, which would allow the government to break even once it sells its 82 per cent stake in the bank.