Government to create three “boring” banking chains

by Gill Montia

Story link: Government to create three “boring” banking chains

Ministers are putting the final touches to plans to create three new High Street retail banking chains in the UK.

The five-year project involves selling assets of the part nationalised Royal Bank of Scotland (RBS) and Lloyds Banking Group, and the wholly state owned Northern Rock.

European Competition Commissioner, Neelie Kroes, should then be satisfied and the Treasury will recoup some of the money used to prop up the ailing institutions.

The new businesses will be created by relatively new entrants to the UK financial sector, such as Tesco and Virgin Money, and will emerge as standard retail, or “boring” banks, as a Treasury spokesman told the BBC.

The businesses will focus on deposits and mortgages, hopefully bring more competition on the High Street as a result.

Final decisions on which assets are to be sold have yet to be made but RBS’s insurance unit, which includes Direct Line and Churchill, will almost certainly be auctioned, as will the groups investment banking activities.

Plans for Northern Rock are more advanced with the European Commission having already approved proposals for the lender to be split into one “good” and one “bad” bank.

Retail deposits and sound loans will be bundled up for sale, and the taxpayer will retain ownership of the balance of the business, including bad loans and the group’s securitisation vehicle, Granite.