RBS and Lloyds Banking Group to be split up

The Chancellor has signalled the likely break-up and sale of the bailed out banks.

 

The Treasury hopes such a move would attract new entrants to the high street banking market and increase competition in the mortgage market.

 

Alistair Darling told BBC television: "What I want to do now is begin the process of reform and reconstruction so we have got a safer, more competitive banking system with more high street banks than we have at the moment, with new entrants coming in."

 

He did not rule out the possibility of existing players such as Santander buying up some of the assets of RBS and Lloyds Banking Group.

 

It is widely believed that RBS will sell its insurance division, which includes Direct Line and Churchill.       

 

The move has been criticised by the Liberal Democrats. Its Shadow Chancellor, Vince Cable, said: "It is obviously right that British retail banking becomes more competitive in order to stop the continual ripping off of customers. But there’s no justification for a rapid sell off of state assets in the current depressed environment when the taxpayer will get a very poor deal.

 

"This is a long-term project and the most important priorities are to make sure banks lend to good customers, especially businesses, in order to stave off deepening recession and growing unemployment and that the taxpayer gets value for money.

 

"What is particularly worrying is the indication that Lloyds is trying to wriggle out of its agreement to maintain lending to good business customers. If it achieves its objectives this would be an appalling example of the short-term interests of banks being put ahead of national interests."

 

The British Bankers’ Association said: "The Chancellor’s announcement that there is to be a restructuring programme for those banks where there is a major public stake is neither unexpected or surprising. We were aware last week about plans for Northern Rock and, generally, it was always intended that public support should be short term. It is also well-known that discussions about state aid have been continuing with the EU authorities. It will take some time for these plans to work through and this is in line with EU Commissioner, Neelie Kroes’ statements that state aid should be wound down over three to four years.

 

"The UK needs a successful banking sector and any plans must ensure the UK remains both internationally competitive and should help maintain our financial services industry’s leading global position. We look forward to seeing the details of the proposals in due course."