Banking shake-up to spawn three high street brands

by Daniel Farey-Jones, Brand Republic 02-Nov-09, 09:20

LONDON - Three new high street banks will be created by breaking up Lloyds TSB, RBS and Northern Rock, the Government is expected to announce this week.

The three banks that were rescued when the Government took whole or partial ownership are to be cut down in size as part of an agreement with the European Commission that will punish them for taking state aid.

All three must separate out a portion of their high street branches and savings and mortgage customers to create new banks, which the Government envisages being sold to other banking groups in future.

RBS may name its spin-off Williams & Glyn's, after a brand it used to operate in the 1970s and 1980s, while Lloyds has been tipped to use either or both of the TSB (Trustee Savings Bank) and Cheltenham & Gloucester brands it owns.

A Treasury source told the Daily Telegraph: "Basically the plan is to have three off-the-shelf starter bans to sell in three or four years' time."

It is understood that dominant players in British retail banking, such as Barclays and Abbey owner Santander, will not be allowed to acquire the new banks.

Instead, the Government hopes supermarkets and foreign banks will be buyers, leading to a more competitive sector.

In addition, the EC is forcing RBS to sell its insurance division, consisting of Churchill, Direct Line and Green Flag and Lloyds to sell its online bank Intelligent Finance.

Lloyds will lose about 5% of the total UK market in personal accounts.