Enlarge imageLONDON (Reuters) - Lloyds Banking Group and the Royal Bank of Scotland may have to sell part of their businesses under proposals to be announced by the Conservatives on Monday, the Times newspaper reported.
The party, riding high in opinion polls, would hold a competition inquiry into the part-nationalised Lloyds if it returns to power in a general election due by next June, the paper said.
"The findings ... will help to inform a Conservative government's strategy for disposing of its banking shares," Shadow Chancellor George Osborne will say, the paper added.
Britain holds large stakes in RBS and Lloyds, created by the merger of banking groups Lloyds TSB and HBOS, following last year's banking crisis.
Depending on the outcome of the inquiry, the Conservatives may decide to legislate for a partial break-up of Lloyds and to a lesser extent of RBS, the paper said.
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A Conservative government would also require banks that combine retail and investment arms to hold additional capital to limit their ability to indulge in high-risk trading, the paper added.
Osborne will also detail plans to abolish Britain's main banking watchdog, the Financial Services Agency (FSA), and transfer its responsibilities to the Bank of England.
The well-heralded proposal would dissolve the "tripartite" system of regulation, split between the FSA, the Bank of England and the Treasury, introduced 12 years ago by Prime Minister Gordon Brown when he was finance minister.
The Conservatives blame the division of responsibilities for failures that led to the state rescue of mortgage lender Northern Rock in 2007 and the subsequent bail-out of other major British banks.
The Conservatives are comfortably ahead of Labour in national opinion polls and Osborne is set to become Chancellor in a Conservative administration.
(Reporting by Tim Castle; Editing by Kim Coghill)
