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 offload its Lloyds branches in Scotland, its Cheltenham & Gloucester branches, and the Intelligent Finance online business.

RBS confirmed plans to place £282 billion in toxic debts into a taxpayer-backed insurance scheme, taking the Treasury's stake to 84%. Lloyds is avoiding the scheme after announcing £21 billion fundraising plans.

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The Government will pump in around £30 billion more into the two banks under the proposals.

The Treasury said both banks would be required to meet “tough conditions” on pay and lending.

Existing commitments to make £39 billion available for homeowners and borrowers will remain in place “to translate into increased lending in the economy”.

Meanwhile, bonuses for executive directors due this year will be deferred until 2012, while no discretionary cash bonuses for any staff earning more than £39,000 will be paid this year.

RBS will receive £25.5 billion in cash upfront from the Treasury as part of the plans for the asset protection scheme (APS) - although the bank will also be able to call on an extra £8 billion if needed.

The company, which is currently 70% state-owned, will no longer pay a £6.5 billion fee but is responsible for a much bigger than originally planned £60 billion “first loss” before the taxpayer support kicks in.

Chief executive Stephen Hester said the announcement marked a “significant step forward” for the bank, which lost a record £24.1 billion in 2008.

He said the sell-offs imposed by the European Commission were more extensive than originally planned but said it would approach the disposals in a “disciplined and thoughtful” way over the next four years.

“I believe today marks a key milestone in the radical restructuring we are undertaking to bring RBS back to stand-alone strength,” he said.

Meanwhile, the Treasury is pumping an extra £5.7 billion in public money into Lloyds to support the bank’s record £13.5 billion cash call on shareholders.

Lloyds - which has been hit by its rescue of ailing HBOS at the height of the financial meltdown - is currently 43% owned by the taxpayer and the bank was desperately keen to avoid its public stake rising any further.

The bank, as expected, will pay £2.5 billion to the Government as a break fee for avoiding the APS, which would have seen it pay £15.6 billion to insure £260 billion in toxic loans, with the taxpayer stake rising to 62%.

Lloyds said the chances of the UK economy deteriorating to the level feared in March when it signed up to the scheme were “materially lower” than eight months ago.

Chief executive Eric Daniels said the bank had produced a “robust” performance. The bank will still be loss-making this year but he added that bad loans in the second half would fall “significantly” compared with the first six months of 2009.