Who pushed Hester?

Here is why RBS's board negotiated the departure of Stephen Hester.

A month ago, the chairman of UK Financial Investments, Robin Budenberg, told the chairman of RBS, Sir Philip Hampton, that the Treasury wanted to begin the privatisation of the bank at the end of 2014.

UKFI manages the government's 81% controlling stake in RBS, so Sir Philip is in no position to ignore what it says.

Mr Budenberg added that this timetable implied that the time had come for Mr Hester to stand down as chief executive of RBS.

Why?

Well by the end of 2014, Mr Hester would have been RBS's boss for six years.

Which means that no investor would then believe he would stay much longer.

Mr Budenberg, a former investment banker, told Sir Philip that it would be much harder to privatise RBS - to sell shares in the bank - if there was widespread speculation at the time that the chief executive was poised to quit.

There would be too much uncertainty about the future direction of the bank.

Secret

Far better therefore for Mr Hester to depart by the end of 2013, allowing a successor nine months or so to run the bank and develop a strategy, prior to the government beginning to offload its stake.

Sir Philip and RBS's board accepted UKFI's argument, which sealed Mr Hester's fate.

Oh, and there is another thing.

It is an open secret in the City that Mr Hester and the chancellor don't get on.

That had two consequences.

First, it was made clear to Sir Philip that the chancellor was keen for Mr Hester to be replaced.

Second, the RBS board was not very resistant to the idea of Mr Hester going, because the directors felt it wasn't optimal that its chief executive should be on difficult terms with any chancellor of the Exchequer, let alone one who is - in effect - their biggest shareholder.

Update 1835:

The Treasury insists that there is no formal timetable for privatisation and says it never told Sir Philip it had to happen at the end of 2014.

But as it happens that is consistent with UKFI telling RBS it has to be ready for sale by the end of 2014.

The other interesting thing that the Treasury has confirmed is that - as Stephen Hester told me yesterday - the process of selling all the 81% taxpayer stake will probably take several years.

Also, for what it's worth, a friend of the chancellor insists that their relationship isn't bad. Even today, he said, Mr Hester and Mr Osborne had a "friendly and good-natured" chat.

Which makes it all the stranger that everyone I've spoken to around Mr Hester says the two don't get on.