Banking reform campaigners accused George Osborne of "spoonfeeding" yesterday over claims RBS will solve its woes by "putting the bad loans in a bad bank."

The bailed-out banking giant trumpeted plans to consolidate its toxic assets with an internal restructure in a bid to "reward the faith of UK taxpayers," just a day after the company confirmed it had suspended two traders in relation to an international investigation into rigged currency exchange rates.

It is alleged traders at a number of banks used instant messaging software to ask colleagues charged with filing daily reports to falsify their data - a setup similar to the Libor-fixing scandal exposed last year.

If true, the trades would have affected trillions of pounds' worth of transactions and contracts.

But the Tory Chancellor was quick to reassure voters yesterday that the bank was reforming, putting around £38 billion of its most high-risk assets - outstanding loans that are unlikely to be repaid - into a new "capital resolution division."

The new department would then sell on the debts and overseas assets to third parties or run them down in later years.

Mr Osborne said it was "unlikely" he would sell the government's 82 per cent stake in the bank before the next election, but insisted RBS was on the mend.

"Under this new direction RBS will deal decisively with the problems of the past by separating out the good from the bad and putting the bad loans in a bad bank," Mr Osborne said.

"Our independent analysis shows that the bad bank should be an internal one, funded by RBS, rather than an external one funded by the taxpayer."

But campaigners ridiculed the chancellor's comments.

Labour MP Pat McFadden, who sits on the parliamentary commission on banking standards offered a pithy retort: "So RBS will have an internal bad bank, as it has had for five years."