UK lenders to sell off big chunks of business for aid

Big British banks bailed out by taxpayers in the wake of the credit crunch will have to sell off large chunks of their businesses in exchange for the billions in state aid they received during the crisis, the government said.

The assets being sold off would be reserved for new entrants to the British banking market, effectively creating three new banks over the coming years. Treasury chief Alistair Darling said the move was in the interest of competition.

"What you really want to do is have quite a substantial divestment - perhaps branches or perhaps particular institutions that they own - made available to other people," Darling told the BBC.

"Unless we get competition we are going to end up with half a dozen big providers, which would be a big reduction in choice and that would not be acceptable," he said.

Banks are 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 the public.

As many as 700 branches could be sold off, according to a government official, who spoke to the AP on condition of anonymity because the moves had yet to be finalized.

That figure would include all of Northern Rock's 100 or so branches, as well as some of 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.

Media reports say RBS may have to sell its Churchill and Direct Line insurance operations, a large part of its investment bank, and its US banking arm, Citizens Financial Group. The Providence, Rhode Island-based business employs about 24,000 people.

Reports also suggest that Lloyds Banking Group could shed its mortgage arm, Cheltenham & Gloucester, and Intelligent Finance, an Internet bank.

The official said it was too early to say which parts of which banks would go up for sale. Both Lloyds Banking Group and RBS declined to comment on the matter.

Source:China Daily