The Government should help small banks assume control of the 632 branches that Lloyds TSB has to offload, one such lender believes.
A deal for the Co-operative Bank to buy the branches broke down last week, with the mutual blaming ongoing economic difficulties and the higher costs of regulation.
The deal, known as Project Verde, had been the Government’s preferred destination for the branches. But the Co-op now faces pressure to plug a large hole in its finances, while Lloyds is planning to float the branches as a new bank under the TSB brand (read more).
However, the chief executive of Secure Trust Bank, Paul Lynam, believes that the Treasury could facilitate a better solution by helping smaller banks to buy up the branches.
The takeover would have increased the Co-op's share of the current account market to around 6%.
Lynam called upon the Government to "act decisively and actively promote the involvement of a profitable, listed challenger bank to shake things up."
This echoes his call made last month for the Treasury to support smaller banks’ efforts to bid for the 316 branches of the Royal Bank of Scotland that has been ordered to sell by the European Commission (read more).
RBS may offload its 316 branches to a consortium led by former Tesco director Andy Higginson, which is ready to offer £1 billion to tempt a quick-fire sale.
Bidding was re-opened for the branches after a £1.6 billion deal with Santander broke down last year.
Other interest parties are thought to include Virgin Money, private equity firms JC Flowers and Corsair Capital, and the billionaire Pears family.
But Lynam, the former head of SME business banking at the RBS group, said that genuine competition would be created in the market by encouraging smaller banks to buy up branches rather than by selling them to "consortia of private-equity firms" or wealthy families "who are simply motivated by making short-term profits."
Keith McDonald
Which4U Editor
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