The Royal Bank of Scotland has agreed a £600m deal to sell 314 branches to a consortium of investors including the Church of England.
The deal, which comes ahead of a flotation, will bring back the Williams & Glyn bank brand to UK high streets after remaining dormant for 30 years.
The consortium is being led by Corsair Capital and Centerbridge Partners and includes the Church Commissioners for England and RIT Capital Partners.
Corsair Capital Management partner and former Kensington Mortgages chief executive John Matlby will become chief executive officer of the new bank.
Maltby ran the specialist lender from 2000 to 2007 but left when the board issued a profit warning and launched a strategic review of its competitiveness. He joined Lloyds Banking Group as head of commercial banking in 2007.
Former FSA chief executive John Tiner was initially leading the bid for the group of investors but stepped down after heavy criticism of his involvement.
The European Commission is forcing RBS to sell 308 RBS branches in England and six NatWest branches in Scotland as a condition of its 2008 bailout.
RBS says the deal means it will need to apply for an extension to its deadline for the sale.
The branches made a £168m pre-tax profit in the first half of 2013 and serves nearly 1.7 million customers with 4,500 staff, a £19.7 billion loan book and £22.2bn in customer deposits.
RBS chairman Sir Philip Hampton said: “We are delighted to be working in partnership with these investors to establish a new challenger bank for UK customers. Williams & Glyn’s will play an important role in the UK banking landscape and will be an excellent new addition to the market, with a particular strength in small business banking – a sector that is so crucial to the UK’s economic recovery.”
CEO designate John Maltby said: “I am very excited about joining the Williams & Glyn’s team. Williams & Glyn’s will have unique advantages.
“It will combine the heritage of an established bank, a strong national customer franchise and an experienced and committed team with the agility, motivation and growth opportunities of a challenger. Williams & Glyn’s will commit to the highest standards of banking ethics and business conduct while providing increased customer choice in the UK banking market.”