Hundreds of branches operated by Royal bank of Scotland (RBS) and Lloyds Banking Group are to be sold off as part of the overhaul of the UK banking system.
Over the next four years, RBS will seek to sell 318 branches across the UK, with around 6,000 jobs at risk. RBS Insurance, which includes Churchill and Direct Line, will also be sold off.
The bank has also said that it will not allow its investment banking arm to rise above fifth in the global league tables.
Similarly, Lloyds is being forced to sell around 20 per cent of its network, comprising of some 600 braches. The sale will include the branches, savings and branch based mortgages of Cheltenham & Gloucester and the Group's internet banking arm, Intelligent Finance.
"The prospect of greater competition in retail banking is good news for consumers. New entrants in the market offering genuinely competitive products will help to address the complacency of some of the big names on the high street," commented Peter Vicary-Smith, chief executive of Which?
"Greater competition will spur banks into working harder to keep their customers happy, which should result in better products and higher levels of service."
Lloyds has also agreed not to make any acquisitions to its business for the next three to four years, while both banks will not be able to pay bonuses to staff on more than £39,000 per annum. All bonus payments to board members will be deferred for this year until 2012.
The large scale sale, representing approximately ten per cent of the UK's retail banking sector, has been ordered by the European Commission, which was concerned about competition in the marketplace after the two institutions were bailed out by the UK Government.
As of the agreement, Lloyds, which is 43.5 per cent owned by the state, will exit out of the Government's asset protection scheme, while RBS will continue to take part in the programme, taking the taxpayer's stake in the institution from 70 per cent to 84 per cent.
"The European Union's move to break up these banks is extremely welcome. However, Darling's claims that today's news reduces risk to the taxpayer is simply not true. All British banks, both the high street ones and the 'casinos' are explicitly underwritten by the British public," said Liberal Democrat Shadow Chancellor, Vince Cable.
"Until we can split up the banks in a meaningful way, so that taxpayers will not be forced to underwrite casino activities, all banks should pay a premium for the explicit support that they receive."
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