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RBS and Lloyds in major shake-up RBS and Lloyds in major shake-up
(21 minutes later)
Royal Bank of Scotland (RBS) and Lloyds Banking Group are to sell off branches in another major shake-up of the UK banking industry.Royal Bank of Scotland (RBS) and Lloyds Banking Group are to sell off 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 318 branches, while Lloyds will dispose of more than 600 branches 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.
FROM THE TODAY PROGRAMME href="http://www.bbc.co.uk/blogs/thereporters/douglasfraser/2009/11/banks_for_sale.html">Douglas Fraser: Banks for sale href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/11/rbs_and_lloyds_remade_by_europ.html">Robert Peston on RBS and Lloyds Will banks split affect customers? FROM THE TODAY PROGRAMME href="http://www.bbc.co.uk/blogs/thereporters/robertpeston/2009/11/the_treasury_hedge_fund.html">Peston on the Treasury hedge fund href="http://www.bbc.co.uk/blogs/thereporters/douglasfraser/2009/11/banks_for_sale.html">Fraser on banks for sale Will banks split affect customers?
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.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.
The payment is to cover the "implicit protection" provided by the government since it first offered to insure Lloyds' book in February.The payment is to cover the "implicit protection" provided by the government since it first offered to insure Lloyds' book in February.
RBS, meanwhile, has confirmed it will join the scheme on revised - and more expensive - terms, the Treasury said.RBS, meanwhile, has confirmed it will join the scheme on revised - and more expensive - terms, the Treasury said.
"I believe what we have here is a better deal for the taxpayer," Chancellor Alistair Darling told the BBC."I believe what we have here is a better deal for the taxpayer," Chancellor Alistair Darling told the BBC.
"It is better in the long run to get private money because at the end of the day, the government does not want to be in the business of running banks," he added."It is better in the long run to get private money because at the end of the day, the government does not want to be in the business of running banks," he added.
The BBC's business editor Robert Peston suggested the Treasury has now effectively become the biggest hedge fund in the UK.
'New entrants''New entrants'
In addition to the sales of RBS branches in England and Wales - originally Williams & Glyn's, RBS will sell 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 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.
Myners on banks shake-upMyners on banks shake-up
"I believe today marks a key milestone in the radical restructuring we are undertaking to bring RBS back to stand-alone strength," RBS chief executive Stephen Hester said."I believe today marks a key milestone in the radical restructuring we are undertaking to bring RBS back to stand-alone strength," RBS chief executive Stephen Hester said.
RBS said the moves would cut its UK market share by two 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 of UK current accounts.Lloyds will sell at least 600 branches, or about 4.6% of the total market 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.
The BBC's business editor Robert Peston said the "forced fragmentation" of UK banks was a priority of outgoing European Competition Commissioner Neelie Kroes. Mr Peston said the "forced fragmentation" of UK banks was a priority of outgoing European Competition Commissioner Neelie Kroes.
But Mr Darling insisted the government wanted the break up to happen.But Mr Darling insisted the government wanted the break up to happen.
"We were very clear with the Commission that we didn't want to see the banks move pieces around a board," he said."We were very clear with the Commission that we didn't want to see the banks move pieces around a board," he said.
"I would like to see, perhaps three new entrants to the High Street.""I would like to see, perhaps three new entrants to the High Street."
Names like German insurance giant Allianz, Generali and Zurich are being mentioned as potential acquirers for the branches sold by RBS and Lloyds, said Douglas Fraser, BBC Scotland's business editor.Names like German insurance giant Allianz, Generali and Zurich are being mentioned as potential acquirers for the branches sold by RBS and Lloyds, said Douglas Fraser, BBC Scotland's business editor.
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 commentsHAVE 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 by a total of £39bn.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.They have also agreed not to pay any bonuses to staff earning more than £39,000 for their performance in 2009.