Bailed-out banks forced into branch sell-off
Britain’s banking sector faces further convulsion in the coming months after it emerged bailed-out banks RBS and Lloyds are being forced to sell branches by the European Commission.
Ten per cent of the retail banking industry is being freed up as a result of European competition rules, after RBS and Lloyds were rescued from collapse by the government during last year’s financial crisis.
“I hope as the economic circumstances change… we can get more competition into the system” chancellor Alistair Darling told the Today programme.
“One of the things we need to make sure is the authorities keep a close eye on this.”
The announcement comes as the government shifts its relationship with the two banks.
Lloyds will raise £21 billion to avoid paying for participation in the Treasury’s asset protection scheme (APS). It will pay the government a fee of £2.5 billion in return for the “implicit protection” already provided since March this year.
The government, which owns 43 per cent of Lloyds, will provide £5.7 billion of funding to assist it in raising this capital.
RBS is being forced to pay more than previously agreed to the Treasury. The government now has an economic interest in the bank of 84 per cent, but its ordinary shareholding will not exceed 75 per cent.
As a result of the changes the government claims risks to the taxpayer have been substantially reduced.
Liabilities have been cut by over £300 billion as a result of the branches sale and Lloyds not participating in the APS.
Shadow chancellor George Osborne flagged up the size of the measures announced today, £39.2 billion, which he said was even larger than last autumn’s bailout.
“With RBS, it breaks a new world record for the biggest bailout of any single bank in any country,” he argued.
“In return for this huge slug of money, there is still no guarantee that it will get lending flowing in the real economy, or help real businesses stay afloat or keep people in work.”
