The sell-offs announced by Royal Bank of Scotland and Lloyds Banking Group represent almost 10% of the UK retail banking market up for grabs, the Treasury said.
The latest push to promote competition in a beleaguered banking market comes after the break-up of nationalised Northern Rock into good and bad banks was approved by European officials last week.
To meet state aid support approval from the European Commission, RBS is selling 318 branches of the former Williams & Glyn's outlets in England and Wales and its NatWest branches in Scotland.
These represent 14% of its UK network and will reduce its retail market share by 2%. Its share of the small business banking market will fall by 5%.
The RBS retail banking businesses on the block include 6,000 staff and 1.7 million customers - including 230,000 small business customers - and £20 billion in assets.
The branches constitute "a viable, standalone, nationwide business", the bank said - although chief executive Stephen Hester said the sale would create "considerable uncertainty".
"As and when they move to new ownership, we will do this in a way that minimises disruption for our customers and staff and costs for our shareholders," he said.
Lloyds Banking Group is selling a retail banking business with at least 600 branches - around a fifth of its UK network. These represent a 4.6% share of the UK personal current accounts market and around 19% of its mortgage assets.
The businesses to be sold include the TSB brand, and Cheltenham & Gloucester, Lloyds TSB's branches in Scotland and some additional Lloyds TSB branches in England and Wales, as well as the Intelligent Finance online banking business.
"To ensure these divestments increase diversity and competition in the UK banking market, the assets can only be sold to small or new players in the market," the Treasury said.
Royal Bank of Scotland is also being forced to sell its insurance business - home to brands such as Churchill, Direct Line and Privilege, as well as Green Flag motor insurance.
Its global merchant services business, which allows clients to take credit and debit card payments and handles five billion transactions each year, is also up for sale, as well as its majority stake in the Sempra commodity trading business.
© 2012 The Press Association Limited
