Written by Janet
Some of Britain’s top banks, including, The Royal Bank of Scotland, Northern Rock, and Lloyds Banking Group are to sell off as many as 700 branches in the next few years in exchange for the public aid they received during the economic meltdown.
The banks were 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 taxpayers.
The branches would be reserved for new entrants to the British banking market, creating three new banks over the next five years or so. Established players such as Barclays PLC or the Spanish Banco Santander S.A., which owns three U.K. businesses, would not be allowed to bid for the businesses.
The official warned that the figures were subject to change, and spoke on condition of anonymity because the moves had yet to be finalized.
The shake-up would come after Britain pumped billions of dollars into its banking sector in an effort to stave off the collapse of its financial system in the wake of the credit crunch. Northern Rock PLC was nationalized early last year after it struggled to raise funds from crunch-hit wholesale lending markets. The government has significant stakes in both the Royal Bank of Scotland Group PLC and the Lloyds Banking Group PLC.
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/ 11/03/2009Britain puts more money in banks, imposes breakup
The British government moved Tuesday to break up the country’s two biggest retail banks, imposing a major shakeup on the financial sector as it exacts payback for last year’s massive state bailout at the height of the financial crisis.
The government also injected billions of pounds more of taxpayer funds into Royal Bank of Scotland PLC and Lloyds Group PLC, underscoring worries the banking sector is not out of trouble yet.
The change effectively pump almost 40 billion pounds ($65 billion) more into the two banks and could result in the creation of as many as three new commercial banks.
The move to make the banks sell off some of their businesses approach comes at the insistence of European regulators to ensure competition in the banking industry after the government’s initial 37 billion pound rescue package last October.
The British government also extracted promises from RBS and Lloyds for new restrictions on bonuses to align pay with long-term performance, reflecting demands from disgruntled taxpayers that the previous culture of big payouts based on short-term gains – and excessive risk taking – not be allowed to continue.