Report: RBS may have to sell Providence-based Citizens Bank

The future of Citizens Bank has been a big question mark locally ever since its U.K.-based parent company Royal Bank of Scotland was rescued by the British government in the fall of 2008, at the height of the financial crisis. RBS remains 82% owned by British taxpayers.

Now RBS is embroiled in the growing interest-rate fixing scandal and may be forced to sell off Citizens, Mark DeCambre reports for the New York Post:

Toronto-Dominion, the Canada-based parent of TD Bank, which operates 1,200 branches mostly in the eastern US, has held informal discussions with RBS about its Citizens Bank unit, sources said.

RBS, said sources, has told interested parties it is looking for $14 billion to $16 billion for the bank — while TD is said to be thinking more along the lines of $8 billion to $12 billion.

The talks were held two or three months ago, these sources said, and are not currently active.

However, Toronto-Dominion believes RBS and the British bank’s CEO, Stephen Hester, may be forced to sell Citizens as it comes under greater scrutiny from regulators amid a growing interest-rate rigging scandal linked to the London interbank offered rate, or Libor, sources said.

Citizens is the second-largest bank in Rhode Island by deposits, with a 22% market share and $10 billion in local assets, according to FDIC data as of June 30, 2011. TD Bank – which expanded to Rhode Island just two years ago – is far down the list with $61 million in assets and just 0.14% market share. A Citizens purchase would quickly vault TD into the top ranks of Northeastern retail banks.

And as if RBS didn’t have enough problems, the WSJ reports the bank is now “in talks with U.S. authorities about its compliance with federal money laundering laws and targeted economic sanctions.”

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