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RBS and Lloyds in major shake-up RBS and Lloyds in major shake-up
(20 minutes later)
Royal Bank of Scotland (RBS) and Lloyds Banking Group are to sell off bank branches in another major shake-up of the UK banking industry.Royal Bank of Scotland (RBS) and Lloyds Banking Group are to sell off bank branches in another major shake-up of the UK banking industry.
The sales have been demanded by the European Commission to safeguard competition concerns after the two were bailed out by the UK government.The sales have been demanded by the European Commission to safeguard competition concerns after the two were bailed out by the UK government.
Brussels has demanded that banks bailed out by taxpayers should be scaled down. RBS will sell RBS branches and Lloyds will lose Cheltenham & Gloucester over the next four years.
RBS will sell its RBS branch network in England and Wales and its NatWest brand in Scotland over the next four years. Lloyds also confirmed it would stay out of a government-run insurance scheme.
Lloyds, which is 43.5%-owned by the government, also confirmed it would raise £21bn in return for staying out of a government-run insurance scheme to cover toxic bank loans. Lloyds, which is 43.5%-owned by the government, will instead raise £21bn, including a £13.5bn rights issue and a £7.5bn debt swap.
But it will have to pay the UK government £2.5bn to avoid joining the Government Asset Protection Scheme (GAPS), which provides state insurance for past toxic loans, for the "implicit protection" already provided by the taxpayer.
RBS has confirmed it will participate in the scheme on revised terms, the Treasury said.RBS has confirmed it will participate in the scheme on revised terms, the Treasury said.
"The likely costs to the taxpayer and the risks on the impact on the public finances have been reduced," the Treasury said."The likely costs to the taxpayer and the risks on the impact on the public finances have been reduced," the Treasury said.
The BBC's business editor Robert Peston said the "forced fragmentation" of our banks was a priority of outgoing European Competition Commissioner Neelie Kroes.
Branch sell offBranch sell off
In addition to the sales of RBS England and Wales - originally Williams & Glyn's - and NatWest Scotland branch sales, RBS will sell RBS Insurance and Global Merchant Services, its card payment business. In addition to the sales of RBS in England and Wales - originally Williams & Glyn's, RBS will sell its its NatWest brand in Scotland, RBS Insurance and Global Merchant Services, its card payment business.
The total disposal will be 318 branches in the UK, or 14% of the RBS retail network.The total disposal will be 318 branches in the UK, or 14% of the RBS retail network.
"I believe today marks a key milestone in the radical restructuring we are undertaking to bring RBS back to standalone strength," RBS chairman Stephen Hester said."I believe today marks a key milestone in the radical restructuring we are undertaking to bring RBS back to standalone strength," RBS chairman Stephen Hester said.
RBS said the moves would cut its UK market share by 2 percentage points in retail banking.RBS said the moves would cut its UK market share by 2 percentage points in retail banking.
It will also sell its stake in commodities trader RBS Sempra Commodities.It will also sell its stake in commodities trader RBS Sempra Commodities.
Lloyds will sell at least 600 branches, or about 4.6% of the total market share of UK current accounts.Lloyds will sell at least 600 branches, or about 4.6% of the total market share of UK current accounts.
That includes the TSB brand in England, Wales and Scotland and mortgage broker Cheltenham & Gloucester, as well as the Intelligent Finance online business.That includes the TSB brand in England, Wales and Scotland and mortgage broker Cheltenham & Gloucester, as well as the Intelligent Finance online business.
Lloyds says the businesses that it will have to sell off account for about £30bn of customer deposits and £70bn of lending, generating income of £1.4bn in the year to December 2008.Lloyds says the businesses that it will have to sell off account for about £30bn of customer deposits and £70bn of lending, generating income of £1.4bn in the year to December 2008.
Asset insurance
Unlike Lloyds, RBS will join GAPS and have £282bn of its assets insured by the taxpayer.
That is less than £325bn of toxic assets first proposed in February, according to the Treasury.
As a result, the UK government's stake in the troubled banking giant will rise to 84%, though the Treasury said its ordinary shareholding will not exceed 75%.
Under GAPS, the government insures - for a price - some of the expected future losses on past investments made by our banks.
If those losses crystallised, some of them would in effect be transferred to the taxpayer.
However, if they did not, the taxpayer might make a profit on the premiums that the government will have charged.
RBS will pay the UK government £700m a year to be in the scheme, and £2.5bn to exit the scheme if and when that happens.
Both RBS and Lloyds have agreed to increase lending to businesses and property owners