Departing Bank of England governor Mervyn King called for state-controlled lender Royal Bank of Scotland Group to be split in two, a move likely to reignite a political debate over how to repair a bank that has languished since a government bailout in 2008.

King's comments on Wednesday set the stage for a clash with UK Treasury chief George Osborne, who has long advocated a relatively hands-off approach to the bank. It also underscores growing desperation within policy circles over how to reboot Britain's flat-lining economy.