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RBS nears toxic asset agreement Lloyds and RBS 'to face shake-up'
(about 5 hours later)
Royal Bank of Scotland has said it is close to an agreement with the Treasury about its participation in the government's asset protection scheme. A big shake-up of UK banks with taxpayer support will be unveiled on Tuesday, the BBC understands.
Announcements on the future of Lloyds and Royal Bank of Scotland will be made jointly by the banks and the Treasury.
Lloyds is expected to say it will raise more than £20bn from investors in return for staying out of the state-run insurance scheme to cover toxic loans.
RBS will confirm it will participate in the government's toxic loan scheme, but on different terms.
The bank, which is 70% state-owned, would buy an insurance policy from the government to cover future losses from some of its more toxic investments.The bank, which is 70% state-owned, would buy an insurance policy from the government to cover future losses from some of its more toxic investments.
RBS will provide an update on the issue before its quarterly results on Friday. Tuesday's announcements are set to include approval from the European Commission of plans to cut back the size of the banks with disposals of branches and other assets.
The Treasury and European Commission are also in talks about the terms surrounding state support for the bank. The Commission had demanded that banks bailed out by taxpayers should be scaled down.
It is not yet clear how the Commission will indicate its backing for the plan. However, a source close to the talks told the BBC that barring last-minute legal technicalities, a full announcement would be made on Tuesday.
'Recovery plan''Recovery plan'
RBS has warned that it may have to sell more of its businesses than originally planned to gain European approval for state support it has received since coming close to collapse last year. RBS has already warned that it may have to sell more of its businesses than originally planned to gain European approval for state support it has received since coming close to collapse last year.
RBS, which has reportedly been ordered to sell its Churchill and Direct Line insurance units and part of its investment banking business, said negotiations would "include some divestments not initially contemplated". On Tuesday, it is set to announce the sale of its insurance businesses Direct Line, Churchill and Green Flag as well as more than 300 bank branches, according to BBC chief economics correspondent Hugh Pym.
"It remains RBS's goal that any required divestments do not threaten its recovery plan, which is already under way," the bank said. For its part, Lloyds will announce the sale of Cheltenham & Gloucester and Intelligent Finance.
In early trade in London on Monday shares in RBS were down by more than 12% at 36.81 pence.
Lloyds move
On Friday, the BBC reported that Lloyds Banking Group was set to end weeks of speculation by announcing it would not join the government's asset protection scheme.On Friday, the BBC reported that Lloyds Banking Group was set to end weeks of speculation by announcing it would not join the government's asset protection scheme.
Lloyds believes it can survive without joining the scheme and is prepared to pay a fee of close to £2.5bn to avoid it, the BBC understands.Lloyds believes it can survive without joining the scheme and is prepared to pay a fee of close to £2.5bn to avoid it, the BBC understands.
The banking group, 43% owned by the taxpayer, is thought to not want the additional government influence which comes with the scheme. The banking group, 43% owned by the taxpayer, is thought to want to avoid the additional government influence which comes with the scheme.
A decision on whether the arrangement goes ahead will be announced early this week, said the BBC's Nils Blythe.