``The Government is understood to be weighing up three potential models for dealing with the "toxic assets" of RBS. The first would to set up a bad bank inside RBS that would be run by an independent team. Alternatively, the advisers have suggested copying the model used by Swiss bank UBS which also created a separate bad bank, but with the support of the country's central bank. A third option would be to establish an entirely separate taxpayer-backed bad bank into which RBS's toxic assets could be placed, along the lines of the method used by the Swedish government in the 1990s.''

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