Three new high Street banking chains are to be created by the government by 2015 as part of a major overhaul. They will be setup by breaking up Royal Bank of Scotland, Lloyds and Northern Rock, the banks it partially or wholly controls after bail-outs. Ministers and the European Competition Commissioner are in talks over reducing the scale of state –supported banks. It comes as the financial Services Authority takes over regulation of the way banks treat their Customers.
Reason why breaking up for 3 more banks
The government, which holds a 70% stake in RBS and 43% of Lloyds Banking Group after the 2008 bailouts, hopes to announce partial sell-offs on Tuesday. It hopes the sale will recoup part of the massive public investment made to save the sector from collapse at the height of the financial crisis.
The newly hived –off banks are meant to be standard retail banks concentrating on deposits and mortgages. They are not intended to be sold to existing financial institution.
Recent reports have suggested that the Lloyds group will sell Cheltenham and Gloucester and Lloyds TSB Scotland. It is also claimed that the company plans to sell Intelligent Finance, which is an online division of Bank of Scotland.RBS is understand to be preparing to put its network of around 300 branches in England up for sale. They would be sold under the name Williams and Glyn’s the brand they used until 1985.
Observer also says RBS will put its insurance division back on the market, including Churchill, Direct Line and Green Flag. These were put up for sale earlier this year but the proposed deal required RBS to proposed deal required RBS to provide finance to the buyer, which was rejected by the bank.
The mortgage and savings part of Northern Rock, described as the “good “part of the firm, is also be sold. It will be sold to a British bank, the Treasury has sold.
A Conservative spokesman said:”We have called for more competition in banking, and for government stakes to be used to strategic effect to that end. “We would also hold a Competition Commission inquiry into the banking market.”
Lib Dem Treasury spokesman Vince Cable welcomed increased competition, but said the sales should not be rushed. He said we must see that “prime cuts are not offered to private investors “and the taxpayers left with the scraps.
In the words of one Treasury civil servant the new banking chains formed out of the state-backed companies will be “boring banks”. They will be sold to new entrants to the banking market. There has been speculation that Tesco and Virgin Money maybe interested, says BBC political correspondent Gillian Hargreaves.
Some reports say that foreign banks will be encouraged to invest in the banks which will be up for sale.
Great news and looking forward where taxpayers can benefit for the new banks.