According to today's Daily Telegraph, the UK government has discussed full nationalisation of RBS - click here for the story. The cabinet apparently believes that a full nationalisation will enable the bank to lend more freely to business. However, this assumes that there is a pent-up demand for bank finance and that RBS has funds to lend. Full nationalisation makes no difference to either of these. In addition, full nationalisation could lead to RBS becoming a bank run in the interests of the government's supporters rather than taxpayers as a whole.
Click here to see an interesting article over at VoxEU on state banks and lending.