Sir George Mathewson, ex-chief executive officer (CEO) and chairman at the financial institution, stated that the bank should consider undoing its acquisition of Natwest, a deal the bank completed in 2000 at a cost of Â£21 billion.
The banker, who helped manage the takeover, also urged the government to contemplate breaking up the Lloyds Banking Group, the other state-backed institution.
He said in his submission to the inquiry, which was quoted by Reuters: âThe Independent Commission should seriously consider requiring RBS to sell off all of its insurance business and to split into two separate banks - which would be RBS and NatWest."
"I do believe, that in the interests of competition, the merger of HBOS and Lloyds was misconceived and Lloyds Banking Group should be broken up."
His comments echo recent calls by deputy prime minister Nick Clegg to reduce the size of institutions within the financial services sector.
In an interview with the BBCâs Andrew Marr, the politician said: âWe cannot as a country ever tolerate letting the banking system get so large it becomes a massive liability to the UK economy. We need to have a sustainable and prosperous banking sector where the taxpayer is not liable."
By Jim Ottewill