Lloyds Banking Group PLC (LYG), in a worst-case scenario, could end up having to pay for the disposal of its retail banking assets if it doesn't find a buyer within the four-year timeframe, it disclosed in a prospectus.

"In particular, should the group fail to complete the disposal of the retail banking business that the group expects to be required to divest within four years, a divestiture trustee would be appointed to conduct the sale, with a mandate to complete the disposal with no minimum price (including at a negative price)," Lloyds said under "risk factors" of its prospectus detailing plans to raise money from shareholders.

A Royal Bank of Scotland Group PLC (RBS) spokesman also said a trustee would be appointed to sell its assets "at any price" if the bank isn't able make the disposals within a five-year timeframe.

On Tuesday, Lloyds, 43%-government owned, unveiled a plan to free itself from increased government assistance by raising GBP21 billion in fresh capital, instead of participating in an expensive scheme to insure billions in toxic assets.

Lloyds also said it will have to sell more than 600 branches in four years to satisfy the European Union over competition concerns related to the government aid the bank received last year.

Meanwhile, 70%-government owned RBS is also being told by the EU to divest from some businesses, including branches in Scotland, in England and Wales, and the accounts of some small and midsize business customers across the U.K., totaling about 2 million customers and GBP20 billion in assets.

Banking and government officials have said they expect good demand for the assets. The government hopes new market entrants will snap up the assets, increasing competition in the sector.

In its prospectus, however, Lloyds warned that "there is no assurance that the price that the group receives for any assets sold pursuant to the restructuring plan will be at a level the group considers adequate or which it could obtain in circumstances in which the group was not required to sell such assets..."

A spokesman for Lloyds said a trustee, if needed, would be nominated by the U.K. government for approval by the EU. Lloyds declined to comment further.

The European Commission wasn't immediately available to comment.

Analysts seemed divided on the level of interest for the assets both Lloyds and RBS are selling.

"There will be plenty of potential buyers with new entrants such as foreign banks, start-ups and private equity firms joining existing players," said Neil Tomlinson, head of retail banking consulting at Deloitte.

The list of potential bidders ranges from existing U.K. players such as National Australia Bank (NAB.AU), owner of the Clydesdale and Yorkshire Banks; Spain's Banco Santander SA (STD); and The Co-operative Bank; new entrants like Virgin Group and Tesco PLC (TSCO.LN); and a number of large European banks, including French bank BNP Paribas SA (BNP) and Spain's Banco Bilbao Vizcaya Argentaria SA (BBV).

Others analysts weren't so bullish, however.

"The extensive integration of these businesses into their parent is an issue. Unplugging them will not be without its challenges and may require investment into brand and systems," said Steve Cater, head of corporate banking for financial services at PricewaterhouseCoopers.

The restructuring plans between the banks and the EU are pending final approval by the European Commission, but that is largely expected to happen within weeks.

RBS hasn't filed a prospectus because, as opposed to Lloyds, it isn't raising capital independently, instead participating in a revised government program to insure GBP280 billion in toxic assets on its books.

-By Patricia Kowsmann, Dow Jones Newswires. Tel +44(0)207-842-9295, patricia.kowsmann@dowjones.com

(Marietta Cauchi contributed to this article.)
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