UK's Bailed-out Banks Forced Into Overhaul

U.K. Treasury chief Alistair Darling on Sunday said all three banks rescued by taxpayer money — which besides Lloyds and RBS includes Northern Rock — would be shedding parts of their businesses.

Media reports say RBS may have to sell its Churchill and Direct Line insurance operations, a large part of its investment bank, and its U.S. banking arm, Citizens Financial Group. The Providence, Rhode Island-based business employs about 24,000 people.

Reports also suggest that Lloyds Banking Group could shed its mortgage arm, Cheltenham & Gloucester, and Intelligent Finance, an Internet bank. Some analysts have even suggested that Lloyds might offload Halifax, the nation's leading mortgage lender.

"Although we can speculate about what else RBS will have to divest it seems we only have a few days to wait for the definitive answer," said Nic Clarke, analyst at Charles Stanley & Co.

RBS said it was also close to agreeing with the Treasury about terms for insuring 325 billion pounds ($530 billion) of troubled assets, a step which will increase the government's stake in the bank from the current 70 percent to more than 80 percent.