The break-up of Lloyds Banking Group and Royal Bank of Scotland will create new standalone banks representing nearly 10 per cent of UK retail banking by 2013.
Lloyds will sell 600 branches, 4.6 per cent of its current account share and around 19 per cent of its mortgage share. RBS will shed 318 branches, including all Scottish NatWest branches, direct small business customers, RBS Insurance and Global Merchant Services.
RBS is joining the Government’s asset protection scheme and will receive £25.5bn but will have to pay £700m a year for three years and £500m a year thereafter. It has agreed to bear the first £60bn of any future losses, with the Treasury responsible for 90 per cent of losses thereafter. The Government’s stake in RBS will rise to 84 per cent.
Lloyds is to raise £21bn through a £13.5bn rights issue and a £7.5bn debt-for-capital swap. It will have to repay £2.5bn to the Government and the taxpayer stake will stay at 43 per cent.
The banks are committed to lending a total of £39bn over the next three years to businesses and homeowners and have agreed not to pay 2009 cash bonuses to staff earning over £39,000.
Executive of both bank boards will defer all bonuses due for 2009 until 2012.
Chancellor Alistair Darling said: “It is better in the long run to get private money because the Government does not want to be in the business of running banks.”