Both Lloyds Banking Group and Royal Bank of Scotland will be forced by the European Commission to make disposals a condition for the state aid they have received from the UK government.

Lloyds expects that it will have to dispose of a retail banking business with at least 600 branches, a 4.6% share of the market for personal current accounts in the UK and about 19% of its mortgage assets. The business will among other things include the TSB brand and the Cheltenham & Gloucester mortgage business. It will need to dispose of the business within four years.

RBS will, among other things, dispose of the RBS branch-based business in England and Wales (originally Williams & Glyn’s) and the NatWest branches in Scotland, along with direct small and medium enterprise customers across the UK. RBS’s UK market share will drop by two percentage points in retail banking, five percentage points in SME banking and five percentage points in the mid-corporate market. It will complete the disposals by the end of 2013.

Alistair Darling, the UK Chancellor of the Exchequer, insisted the government wanted the break-ups to happen. "I would like to see, perhaps three new entrants to the High Street."