LONDON (AFP) –
Britain's government is to create three new high street banks from bailed out lenders Royal Bank of Scotland, Lloyds Banking Group and Northern Rock, finance minister Alistair Darling said Sunday.

The huge shake-up comes as the government seeks to recoup taxpayers' cash used to prop up the banks during the world financial crisis and increase competition in the sector.

Lloyds is 43 percent owned by the state and RBS 70 percent, while Northern Rock was nationalised outright.

Darling, the Chancellor of the Exchequer, said the three existing lenders would be broken up and parts sold in the next few years to new entrants to the sector, who would concentrate on deposits and mortgages.

"What you really want to do is have quite a substantial divestment -- perhaps branches or perhaps particular institutions that they own -- made available to other people," Darling told the BBC.

"Because unless we get competition we are going to end up with half a dozen big providers which would be a big reduction in choice and that would not be acceptable."

Northern Rock would be split into two parts by the end of the year, he said.

EU regulators last week approved the state aid contained in plans to break up and sell Northern Rock.

"We will be able to split Northern Rock by the end of the year but I'm not going to rush into a sale. We will only sell when the time is right and when the price is right," he said.

"I'm determined that because the taxpayer put a lot of money into stabilising the system, the taxpayer is entitled to get that money back."

He said he was looking for new entrants into the British banking market rather than existing financial institutions, to improve competition.

"I would hope that you would have three new entrants over the next few years, some already in banking, others may decide it's something they want to get into."

Darling did not reveal details of the new banks to emerge from the breakup plans. But his comments come after media reported Sunday that the plans would include RBS to sell 300 branches, while Lloyds could launch a 13 billion pound (14.5 billion euro, 21.5 billion dollar) cash call.

The government could also up its stake in RBS from 70 percent to up to 84 percent, the Sunday Times reported.

All three banks received huge government bailouts at the height of the global economic storm but regulatory authorities are concerned about such state-backed banks having an unfair advantage over those that were not helped.

The Sunday Telegraph reported that no current owner of a British retail bank would be allowed to take on the new institutions so buyers could come from the United States, Australia or the Middle East.

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