The Bank Bailout - what does it mean for your current account?

Chancellor Alistair Darling's plans to bailout the banks look set to hit taxpayers for at least another £28.7 billion as break-up plans were revealed for two state-backed banks.

The announcement aims to provide competition and could potentially cause the biggest financial changes to be been seen in decades.

The Chancellor confirmed that the only way for the Royal Bank of Scotland (RBS), which is 70 percent owned by the state, to survive would be if it was given £25.5 billion from the public purse.

Since the start of the financial crisis last year the Government has provided £74 billion of taxpayers' money to the banks.

However, due to concerns about the vast amounts of money that has been given by the state to RBS and Lloyds Banking Group, they will have to lose more than 900 of their branches to allow for competition.

It is as yet a little unclear what exactly will go but RBS is likely to sell its insurance arm which includes Churchill, Direct Line and Green Flag, as well as its 312 RBS-branded branches in England, and six NatWest branches in Scotland, plus part of its investment banking business.

Lloyds is likely to sell C&G, its Lloyds TSB network in Scotland and its Intelligent Finance online bank.

So far, just £2 billion of the bank bailouts has been repaid to the Treasury, though the Government insisted this time around the taxpayers will see their money being returned with key elements of the banks being sold off.

The announcement may not see instant changes to the banks - the government has said it could take up to four years - but it does mean that approximately 10 per cent of the UK retail banking market could be claimed by smaller players or entirely new banking companies.

New banks to add competition?

With the banking giants being told that they must sell off key elements of their operations there is potential for some gains to be made by the consumer.

The intention is for increased competition which, if new players decide to buy the parts up for sale, could mean a choice of current accounts being made available for the people of Britain.

Three new banks will be created by the sales with the hope that overseas banks as well as supermarkets will show an interest. Businesses with a successful track record in other areas, such a supermarket giant Tesco and Sir Richard Branson's Virgin, could well be tempted to get involved in the crucial market.

One of the benefits of this is that it should prove easier to get mortgages and loans. It will also lead to increased consumer choice about who gets their money and - so the government states- the repayment of some of the tens of billions which taxpayers have paid out in the banking crisis.

Varying opinions on the news

The British Bankers' Association (BBA) welcomed the news, it stated: "The UK needs a successful banking sector and moves today to see UK banks, where there is a significant public stake, emerge, over time, from taxpayer support are welcome.

"This is good news for taxpayers who can now look forward to getting their money back at a premium. It is well-known that discussions about state aid have been continuing with the EU authorities and it will take some time for these plans to work through with state aid wound down over 3 to 4 years.

"The UK has a highly competitive retail banking sector already offering greater customer choice than in many other countries. The BBA has always welcomed competition for high street banking services and choice for customers."

However, Mark Hoban, the shadow financial secretary, was more critical of the news saying: "As far as the three new banks are concerned, when we called for smaller banks six months ago the Treasury dismissed our calls as being 'on the wrong side of the argument'.

"Now they are being forced into it by the EU. Now they have accepted our case for smaller banks we need a full scale Competition Commission review of the retail banking sector."

It seems unclear whether the news will benefit consumers, initially it least it will be cost a huge chunk of pubic money but the potential for new banks may, the government hopes, provide some much needed competition.