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BRUSSELS (Reuters) - Partially nationalised lenders Royal Bank of Scotland and Lloyds may have to sell a large chunk of their assets to comply with EU antitrust rules, the EU's competition chief said on Tuesday.
"The massive aid received by banks such as Lloyds and RBS allows these banks to remain leaders on markets which are concentrated," Competition Commissioner Neelie Kroes said in a speech at a banking conference in London.
Kroes, in charge of ensuring fair play in the 27-country European Union, cited "problems" with Lloyds' share of the UK retail banking market and the share held by RBS of the small- and medium-sized enterprises and corporate banking markets.
"The need for competitive market structures is stronger than ever; the likelihood of significant divestments by RBS and Lloyds is strong," she said.
Lloyds last month said it expects to sell or exit from certain parts of its business to win EU approval for its state bailout.
The lender's comments fuelled speculation these could include Scottish Widows, life insurer Clerical Medical and investment management operation Insight.
The EU executive had already indicated that regulatory approval of state aid would be conditional on asset sales after it agreed to restructuring plans by Commerzbank and WestLB, which included roughly halving their balance sheets.
Kroes said she was not pre-judging any case, but was just being realistic.
"We aren't interested in cutting jobs or closing whole businesses. It is only our job to ensure that banks are in a state to survive on their own, and to ensure competition is not allowed to drain away," she said.
The government acquired its 70 percent stake in RBS and 43 percent of Lloyds as part of a taxpayer-funded bailout worth 37 billion pounds last year, as both banks struggled with soaring losses on risky credit-backed assets. The Commission is now looking into whether British state aid for nationalised Northern Rock violated EU competition rules. It has to date endorsed 70 banking bailouts across the region.
Reporting by Foo Yun Chee; Editing by Dale Hudson