Britain Puts More Money In Banks, Imposes Breakup

JANE WARDELL

LONDON (AP) — The British government moved Tuesday to break up the country's two biggest retail banks, imposing a major shakeup on the financial sector as it exacts payback for last year's massive state bailout at the height of the financial crisis.

The government also injected billions of pounds more of taxpayer funds into Royal Bank of Scotland PLC and Lloyds Group PLC, underscoring worries the banking sector is not out of trouble yet.

The change effectively pump almost 40 billion pounds ($65 billion) more into the two banks and could result in the creation of as many as three new commercial banks.

The move to make the banks sell off some of their businesses approach comes at the insistence of European regulators to ensure competition in the banking industry after the government's initial 37 billion pound rescue package last October.

The British government also extracted promises from RBS and Lloyds for new restrictions on bonuses to align pay with long-term performance, reflecting demands from disgruntled taxpayers that the previous culture of big payouts based on short-term gains — and excessive risk taking — not be allowed to continue.