Banks tamed but not hamstrung by bailout

By Paul Hoskins and Myles Neligan

LONDON (Reuters) - Banks who opted out of the country's 37 billion pound bailout expect to enjoy a two-tier system where rivals are hamstrung by strict rules imposed as conditions for their government cash injections.

Are they right?

Certainly that was the market's verdict on Monday. Shares in those taking part in the bailout dived, while HSBC (HSBA.L), Barclays (BARC.L) and Standard Chartered (STAN.L), who believe they can do without taxpayers' money, jumped.

But some analysts believe the terms and conditions that will apply to Lloyds TSB (LLOY.L), HBOS HBOS.L and Royal Bank of Scotland (RBS.L) in return for billions of pounds of state money may not be as onerous as investors fear, or their rivals hope.

Barclays Chief Executive John Varley told reporters that going it alone could give the bank a competitive advantage.

"What we are protecting and what we want to protect is the right to self-determination," Varley said. "It's helpful if competitors in some countries where we operate have less strategic choice than we do."

Barclays is boosting capital by over 6.5 billion pounds but has said it can do so without government help, with one existing shareholder already promising to contribute 1 billion pounds.

HSBC and Standard Chartered, whose businesses are more internationally focussed, had never been expected to take part.