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RBS and Lloyds in major shake-up RBS and Lloyds in major shake-up
(10 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.
RBS will sell RBS branches and Lloyds will lose Cheltenham & Gloucester over the next four years. RBS will sell 318 branches, while Lloyds will dispose of more than 600 branches over the next four years.
Lloyds also confirmed it would stay out of a government-run insurance scheme.Lloyds also confirmed it would stay out of a government-run insurance scheme.
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.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.
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
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.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. The BBC's business editor Robert Peston said the "forced fragmentation" of UK banks was a priority of outgoing European Competition Commissioner Neelie Kroes.
Branch sell offBranch sell off
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. In addition to the sales of RBS branches 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.
Lloyds will avoid joining the GAPS protection scheme
"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 two 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 insuranceAsset insurance
Unlike Lloyds, RBS will join GAPS and have £282bn of its assets insured by the taxpayer.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.That is less than £325bn of toxic assets first proposed in February, according to the Treasury.
HAVE YOUR SAY All this taxpayer value for money and better competition talk is just spin and propaganda to hide the fact banks will be continuing under very little regulationJohn Conroy, Omagh Send us your comments
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%.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.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.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.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.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 Both RBS and Lloyds have agreed to increase lending to businesses and property owners by a total of £39bn.
They have also agreed not to pay any bonuses to staff earning more than £39,000 for their performance in 2009.