Britain’s government is to create three new high street banks from bailed out lenders Royal Bank of Scotland (RBS), Lloyds Banking Group and Northern Rock, media reports said yesterday.
The huge shake-up comes as the government seeks to recoup taxpayers’ cash used to prop up the banks during the world financial crisis and increase competition.
Lloyds is 43 percent owned by the state and RBS 70 percent, while Northern Rock was nationalized outright.
The government could confirm the move, to come in by 2015, tomorrow, reports said.
“What we are talking about here is basically three new banks,” an unnamed Treasury source told the Sunday Telegraph. “We want a better deal for the taxpayer after all the investment that they have made.”
The new banks would be retail-focused, concentrating on deposits and mortagages.
RBS and Lloyds are also reportedly set to sell off some parts of their businesses, while the Observer reported that Lloyds is set to launch a £13 billion (US$21.5 billion) cash call.
Meanwhile, the government could increase its stake in RBS from 70 percent to up to 84 percent, the Sunday Times reported.
EU regulators last week approved the state aid contained in plans to break up and sell Northern Rock.
The assets being put up for sale would be reserved for new entrants to the British banking market, an official, who requested anonymity, said late on Saturday.
The official said that the banks were in negotiations with Britain’s treasury and European regulators over how many assets they would have to give up in return for the help they received from taxpayers.
“Essentially, they are expected to have to divest — each of them -- some of their branches,” he said.
As many as 700 branches could be sold off, the official said.
That figure would include all of Northern Rock’s 100 or so branches, as well as chunks from the Lloyds Banking Group PLC’s approximately 3,000 branches and just over 2,200 branches operated by the Royal Bank of Scotland Group PLC.
Established players such as Barclays PLC or the Spanish Banco Santander S.A., which owns three UK banking businesses, would not be allowed to bid.
The official warned that the figures were subject to change, and spoke on condition of anonymity because the moves had yet to be finalized.
The shake-up would come after Britain pumped billions of pounds into its banking sector in an effort to stave off the collapse of its financial system in the wake of the credit crunch.
Northern Rock was nationalized early last year after it struggled to raise funds from crunch-hit wholesale lending markets. The government has significant stakes in both RBS and Lloyds Banking Group.
The EU has kept a wary eye on efforts by Britain and other governments to prop up their banks, warning that it may call on banks that got public help to sell off some of their units, a move intended to help counter the advantage they get from massive state recapitalizations.
In the case of RBS, Northern Rock and Lloyds Banking Group, proceeds from the sales would indirectly help the government recoup some of the money it spent bailing the banks out because it still owns all or parts of them.
Lloyds Banking Group and RBS declined to comment on the matter.
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