City heavyweights aim to set up new banking player

City grandees are working on plans to snap up state-owned banking assets such as Northern Rock to create a new player on the high street.

Lord Levene, chairman of the Lloyd's of London insurance market, and Sir David Walker – who headed a review into bank boardroom practices – are backing the launch of a new venture that would look to bid for taxpayer-backed assets.

The corporate heavyweights are planning to list an acquisition vehicle on the stock market and have already got investment banks and advisers on board, sources close to the venture confirmed.

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UK Financial Investments, which oversees Government-owned banking assets, and the City regulator have already been briefed on the proposals, with details expected to be announced within days.

The new venture will set its sights on retail banking assets only, including nationalised Northern Rock, which the Government wants to sell back to the private sector. The project aims to create a new banking player to rival the established groups.

n Blue chip bank stocks rallied higher yesterday as details of Europe's stress test plans signalled the next step in restoring confidence in the wake of the financial crisis.

The UK's big four banks are among the 91 groups named yesterday to be "stress tested" to assess resilience and ability to withstand further economic and credit shocks.

Financial analyst Bruce Packard at Seymour Pierce said a credible stress test was seen as vital in generating confidence in the battered European sector.

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