RBS is to sell a total of 318 branches and Lloyds more than 600 over the next four years, which equates to about 10% of the total UK retail banking market.
The move follows pressure from European competition commissioner Neelie Kroes, who demanded Lloyds and RBS sell some of their operations after the two were bailed-out by the Government last year.
RBS, 70% owned by the taxpayer, will sell its branches in England and Wales, which originally operated under the Williams & Glyn’s brand until the 80s.
It will also sell its NatWest brand in Scotland, its RBS Insurance portfolio, which includes the Direct Line, Churchill and Privilege brands. and card payment business Global Merchant Services.
Lloyds, 43.5% owned by the Government, will sell the TSB brand in England, Wales and Scotland, Cheltenham & Gloucester and its online savings business Intelligent Finance.
Stephen Hester, chairman of RBS says the sell-offs mark a “key milestone in the radical restructuring we are undertaking to bring RBS back to standalone strength”.
Chancellor Alistair Darling has said that the assets will be sold to new entrants to the UK banking market in order to increase competition and choice in the sector.
This could pave the way for non-bank brands with ambitions to grow in the sector, such as Tesco and Virgin, to bid for the assets. It could also result in the parts being sold off to foreign financial services firms.
Lloyds and RBS have received billions in state aid since the height of last year’s financial crisis.
Lloyds also announced it will raise £21bn through a £13.5bn rights issue and a £7.5bn debt swap.