Future Changes for RBS, Lloyds and Northern Rock to be Announced

Today, on November 3rd, the Government will reveal the final details of the future of 3 UK banks that received state aid earlier this year: Northern Rock, Lloyds Banking Group, and Royal Bank of Scotland.
Let us remind that the state aid to these banks, which amounted to £585 billion in insurance policy, was granted on a condition that UK banks commit themselves to a number of changes to improve competition.
First and foremost, three new banks are to be created from the old empires. As for Northern Rock, it will see a new bank created on the basis of its deposit and mortgage books, each of which amounts to £18.5 and £10 billion respectively. At Royal Bank of Scotland, it will be the Williams & Glyn brand that is to be resurrected and sold so that RBS’ share on the market of small business banking to 20%, down from 30%. Finally, at Lloyds Banking Group, such brands as Cheltenham & Gloucester, TSB, Trustee Savings Bank, and Intelligent Finance will be dropped, reducing Lloyds share of the mortgage and current account market by 5%, from 30% to 25%.
More importantly, these banks will not be sold to any of the big banks, according to the UK Government. Instead, the sale of the three banks is aimed at bolstering competition on the British market. The possible bidders on the new banks include Virgin Money, National Australia Bank, BBVA, Santander, BNP, and Société Générale.
In addition to creation and sale of new banks, Northern Rock, Lloyds Banking Group, and Royal Bank of Scotland will see new restriction imposed on them. As such, Northern Rock’s new mortgage lending will be limited to £4 billion in 2009, while its retail deposit balances will not be allowed to exceed £20 billion.