Santander can bid for RBS branches

Santander, the euro-zone's largest bank by market value, will be allowed to bid for Royal Bank of Scotland's 312 business-focussed branches under competition rules agreed between Brussels and London, the Financial Times reported on Monday.

The government is set to announce a banking overhaul this week geared towards attracting new players to the market, as carve-up plans for rescued banks Royal Bank of Scotland and Lloyds are finalised.

But Santander, which already owns Abbey, Alliance & Leicster and Bradford and Bingley, would be allowed to bid as it has less than 8 percent of the small business lending market.

The acquisitive Spanish banking group will not, however, be allowed to bid for more than a handful of retail branches to be sold by RBS and Lloyds.

Santander's 14 percent share of the retail market is too close to the 15 percent seen as the maximum allowable in any sector by the government for those hoping to bid for the bank branches owned by RBS and Lloyds.

Chancellor Alistair Darling said on Sunday he expected "perhaps three new entrants" would emerge from a process that will see the country's largest retail lenders selling off assets, including a string of high street bank branches, and shrinking back their balance sheets.

Darling, who has frequently spoken of the need for greater competition among retail lenders, stopped short of saying he will block existing players in the market, such as Santander.