Britain must push the Royal Bank of Scotland, to undergo a deep restructuring to split off bad assets still on its books and recapitalize, the head of the Bank of England said on Wednesday.

Mervyn King - making his strongest criticisms to date on how RBS is run just weeks before the Bank takes on new powers to oversee banks - said it was "nonsense" that the government did not have more direct control over RBS which was bailed out with taxpayers' money.

"The whole idea of a bank being 82 percent owned by the taxpayer, run at arms' length from the government, is a nonsense. It cannot make any sense," King told a parliamentary committee.

"The arguments for restructuring sooner rather than later are powerful ones."

Shares in RBS fell after King's comments and were trading at 312 pence at 10.40 a.m. British Time, down 0.8 percent on the day.

The Bank has repeatedly urged British banks to raise capital levels to help protect them against a repeat of the kind of shocks that triggered the financial crisis.

King said it should not take more than a year to a carry out a much more decisive restructuring of RBS than efforts to date.

The Bank has taken an increasingly tough line on the amount of capital banks hold and the government has chosen Bank of Canada governor Mark Carney, a leader of the global push for stronger banking regulation, to succeed King at the Bank in July.

(Reporting by Huw Jones and David Milliken; writing by William Schomberg Editing by Maria Golovnina)