LONDON — The Royal Bank of Scotland, Northern Rock, and Lloyds Banking Group are to sell off as many as 700 branches in the next few years in exchange for the public aid they received during the economic meltdown, a government official told The Associated Press on Saturday.
The assets being put up for sale would be reserved for new entrants to the British banking market, effectively creating three new banks over the next five years or so, the official said.
The official said that the banks were in negotiations with Britain's treasury and European regulators over how many assets they would have to give up in return for the help they received from taxpayers.
"Essentially, they are expected to have to divest – each of them – some of their branches," he said.
As many as 700 branches could be sold off, the official said. That figure would include all of Northern Rock's 100 or so branches, as well as chunks from the Lloyds Banking Group PLC's approximately 3,000 branches and just over 2,200 branches operated by the Royal Bank of Scotland Group PLC.
Established players such as Barclays PLC or the Spanish Banco Santander S.A., which owns three U.K. banking businesses, would not be allowed to bid.
The official warned that the figures were subject to change, and spoke on condition of anonymity because the moves had yet to be finalized. He added that an official announcement could come within days.
The shake-up would come after Britain pumped billions of pounds (dollars) into its banking sector in an effort to stave off the collapse of its financial system in the wake of the credit crunch. Northern Rock was nationalized early last year after it struggled to raise funds from crunch-hit wholesale lending markets. The government has significant stakes in both RBS and Lloyds Banking Group.
The European Union has kept a wary eye on efforts by Britain and other governments to prop up their banks, warning that it may call on banks that got public help to sell off some of their units, a move intended to help counter the advantage they get from massive state recapitalizations.
In the case of RBS, Northern Rock and Lloyds Banking Group, proceeds from the sales would indirectly help the government recoup some of the money it spent bailing the banks out because it still owns all or parts of them.
Lloyds Banking Group and RBS declined to comment on the matter late Saturday.