RBS and Lloyds break-up: What they’re saying

Chancellor Alistair Darling hopes that the break up of Lloyds-TSB, Royal Bank of Scotland and Northern Rock at a cost of more than £30bn will allow "perhaps three new entrants" into British high street banking.

The move has been forced by the European Commission, which is punishing Lloyds and RBS for the billions of bailout money they have taken from the British government. The sell-off is expected to be completed over the next four years, with Lloyds disposing of more than 600 branches and RBS losing 318.

As well as giving up its online Intelligent Finance business, Lloyds is selling its Scottish branch network as TSB. RBS is selling its branches in England and Wales, possibly under the name Williams & Glyn's, and will ditch its insurance arms, Churchill and Direct Line.

The EU has already approved the break up of Northern Rock into a 'good bank', which will be sold and continue to loan money, and a 'bad bank', which will hold bad mortgages, pay off outstanding government loans and eventually be liquidated. Possible bidders for the new banks include Virgin Money, Tesco and National Australia Bank.

As part of the deal, both RBS and Lloyds have said that no cash bonuses would be paid to staff earning over £39,000 for 2009. Board members will be paid their 2009 bonuses – but not until 2012. In return, the government will give another £25.5bn to RBS and £5.7bn to Lloyds.

WHAT THEY'RE SAYING:

Ian Gordon, analyst at Exane BNP Paribas: "The greatest 'triumph' of this entire episode for Lloyds is probably the capitulation by Brussels, possibly assisted by the UK government, apparently choosing to give Lloyds special treatment in comparison to all other state-aided banks."

Robert Peston, BBC business editor: "It was the current top team at Lloyds that (unlike their opposite numbers at Royal Bank) were the architects of the bank's woes. Which is why some might say that cancelling bonuses would perhaps be more appropriate than postponing them."

Alistair Darling, chancellor: "I believe what we have here is a better deal for the taxpayer. It is better in the long run to get private money because at the end of the day, the government does not want to be in the business of running banks."

Jeremy Warner, the Daily Telegraph: "The only people likely to gain from this ill conceived break-up are the investment bankers and lawyers charged with undertaking it. The fees will once again be off the scale."

Vince Cable, Lib Dem Treasury spokesman: "It is obviously right that British retail banking becomes more competitive to stop the continual ripping-off of customers. But there's no justification for a rapid sell-off of state assets."

David Kuo, director of Motley Fool: "The consolidation of Alliance & Leicester, Bradford & Bingley, Northern Rock, and more recently Standard Life Bank, is testament that the UK has too many banks for a shrinking market. To create artificial competition will be damaging to existing banks at a time when they need to rebuild their balance sheets."

Dan Roberts, the Guardian: "The final act of Britain's banking tragedy is not a pretty sight... The taxpayer is paying a high price to preserve the fiction that British banking is back on its own two feet."

George Osborne, shadow chancellor: "The government is having to put another £39.2bn of taxpayer's money into the banks - a bigger bail-out than the original bail-out last autumn. Yet still there is no guarantee that it will get credit flowing in the economy."