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, a government official told The Associated Press. The assets being put up for sale would be reserved for new entrants to the British banking market, effectively creating three new banks over the next five years or so, the official said late Saturday. The official said that 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. “Essentially, they are expected to have to divest – each of them – some of their branches,” he said. As many as 700 branches could be sold off, the official said. That figure would include all of Northern Rock's 100 or so branches, as well as chunks from the Lloyds Banking Group PLC's approximately 3,000 branches and just over 2,200 branches operated by the Royal Bank of Scotland Group PLC. Established players such as Barclays PLC or the Spanish Banco Santander S.A., which owns three UK banking businesses, would not be allowed to bid. The official warned that the figures were subject to change, and spoke on condition of anonymity because the moves had yet to be finalized. He added that an official announcement could come within days. The shake-up would come after Britain pumped billions of pounds (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 was nationalized early last year after it struggled to raise funds from crunch-hit wholesale lending markets. The government has significant stakes in both RBS and Lloyds Banking Group. The European Union has kept a wary eye on efforts by Britain and other governments to prop up their banks, warning that it may call on banks that got public help to sell off some of their units, a move intended to help counter the advantage they get from massive state recapitalizations. In the case of RBS, Northern Rock and Lloyds Banking Group, proceeds from the sales would indirectly help the government recoup some of the money it spent bailing the banks out because it still owns all or parts of them. Lloyds Banking Group and RBS declined to comment on the matter late Saturday. The UK government will announce a banking overhaul this week which it hopes will attract new players to the market, as carve-up plans for rescued banks Royal Bank of Scotland and Lloyds are finalised. British finance minister Alistair Darling said on Sunday he expected “perhaps three new entrants” would emerge from a process that will see the country's largest retail lenders selling off assets, including a string of high street bank branches, and shrinking back their balance sheets. “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,” Darling told BBC television. Darling, who has frequently spoken of the need for greater competition among UK retail lenders, stopped short of confirming expectations he will block existing players in the UK market – including the acquisitive Santander – from buying the assets.
