The Government has rejected calls from the Treasury select committee to apply a public interest test to Lloyds Banking Group’s sale of 632 branches.
Lloyds has been told to sell off the branches by the European Commission as part of the agreement surrounding its bailout. The TSC made the call in its report into competition and choice in the banking sector, published in April.
Today the committee publishes the Government’s response to its report which does not accept the recommendation.
It says: “Lloyds is responsible for executing its retail divestment in accordance with the legally binding state aid term sheet. A monitoring trustee has been appointed to monitor and ensure compliance with the commitments.”
Unlike similar divestments of banks rescued by the taxpayer, the sale of the Lloyds branches does not come within the remit of UK Financial Investments. If it did the Government would have more control over how the sale goes ahead.
Lloyds is not allowed to sell its branches to a bank with more than 14 per cent of the current account market, ruling out the big five banks. However, if the Government does have concerns about how Lloyds sells off the branches it will still have the option of referring the arrangement to the Competition Commission.
Virgin Money, the Co-op Group and start up bank NBNK are thought to be among those who entered bids to buy the branches before yesterday’s deadline. The divestment must be complete by November 2013.
In his Mansion House speech last month, Chancellor George Osborne announced that he was putting Northern Rock up for sale.
The Government’s response to the committee says the Treasury will consider the impact on the structure of the market and consumers and any recommendations from UKFI regarding the sale of Northern Rock.
The Government also praises the “free and impartial information and advice” provided by the Money Advice Service as a service that will help promote an understanding of financial products and as part of the answer to encouraging consumers to shop around.