RBS and Lloyds Banking Group: Alistair Darling’s reform

Chancellor Alistair Darling will bow to pressure from Brussels and agree to break up banks that are supported by the taxpayer. The future of high street banking will change for ever.

Darling is expected to announce tomorrow that Lloyds Banking Group (LON:LLOY) and RBS (LON:RBS) will be stripped down and parts sold to new owners, this could create as many as three new institutions on the high street. The Chancellor will argue that this is needed to introduce more competition in the retail banking sector.

It was only a year since the Government agreed to the merger of Lloyds and HBOS to create Britain’s biggest bank. All this could mean Lloyds will be forced to sell off TSB Scotland which was brought in 1995.RBS is likely to be forced to give up NatWest branches in Scotland and also its insurance businesses, including Churchill, Direct Line and Green Flag.

It is believed that the Spanish bank Santander will be allowed to bid for RBS’s business banking group. Northern Rock (PINK:NHRKF) is likely to be split by the end of the year into a good bank, Bank Co, which can be sold off, and a bad bank, the assets of which will be wound down. To read more on this story go to timesonline.co.uk.