New Co-op deal proposed for Lloyds branches

Fresh life has been breathed back into the Co-op's bid to takeover 632 Lloyds branches after reports said a new deal was put to the City Regulator.

The Co-op's attempts to win control of Lloyds' "Project Verde" branches had faltered after the Financial Services Authority (FSA) raised questions about management capabilities and governance at the Co-op.

Two weeks ago Lloyds ended an exclusivity deal with Co-op, allowing NBNK, a new banking venture led by Lord Levene and Gary Hoffman, to enter the fray.

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But the Sunday Telegraph said that a new proposal was in the hands of the FSA, which would see Verde's interim management team transferring along with the branches to run the Co-op's enlarged banking business.

The branches in question would stay on Lloyds' technology platform and remain reliant on the bank for operational capability, the newspaper reported.

The European Union has set a deadline of November 2013 for Lloyds to sell the Verde branches as a condition of having accepted a taxpayer bailout.

The assets in the frame include TSB and Intelligent Finance brands; they account for a 4.6% share of the total UK current account market and around 19% of Lloyds' mortgage book.

The 632 branches would come with about five million customers.

Meanwhile, MP's on the Treasury Select Committee will meet on Tuesday to take evidence on what to do with the shares currently owned by the taxpayer in both Lloyds and Royal Bank of Scotland.

It will take evidence from the great and the good of the City, including investment banks and institutional investors.

The banks were bailed out in 2008 to the tune of £65bn, but those stakes are now worth half that amount.