London  - The British government Tuesday announced plans to restructure two part-nationalized banks bailed out by the taxpayer at the height of last year's crisis.

The treasury said the scheme, under which the Royal Bank of Scotland (RBS) and Lloyds Banking Group will have to sell of major assets, are aimed at increasing competition in line with proposals by the European Commission.

The commission ruled last month that banks which received state aid should not have an unfair advantage.

RBS is selling RBS-branded branches in England and Wales, its NatWest branches in Scotland, the Churchill and Direct Line insurance arm and parts of its investment banking business as the price of state support.

Lloyds Banking Group will divest its Lloyds branches in Scotland, its Cheltenham & Gloucester branches, and the Intelligent Finance online business.

The government will pump around 30 billion pounds (49 billion dollars) more into the two banks under the proposals.

The plans mean that 10 per cent of all of Britain's banking capacity will be freed up for sale by new buyers, possibly from outside the banking sector, Treasury Secretary Alistair Darling said.

The government's share in RBS is to rise to 84 per cent under the scheme. The Edinburgh-based bank announced late Monday that a further 3,700 jobs would be cut at branches across Britain.

The Treasury said both banks would be required to meet "tough conditions" on pay and lending. Bonuses for executive directors due this year will be deferred until 2012, while no discretionary cash bonuses for staff earning more than 39,000 pounds will be paid this year.

The government has already announced plans to return mortgage lender Northern Rock to the private sector. (dpa)