(Update) Shares in RBS and Lloyds have fallen over uncertainty as to what the European Commission and UK government's intentions to the partly nationalised banks will be.

Royal Bank of Scotland (RBS) and Lloyds Banking Group - both bailed out by the taxpayer at the height of the financial crisis - are set to be carved up, with parts of the businesses sold to new owners as part of  plan to shake-up retail banking and improve competition.

Among the likely changes, Lloyds is expected to sell-off Cheltenham & Gloucester, as well as its online bank Intelligent Finance, and the Lloyds TSB business in Scotland.

Meanwhile RBS is set to be forced to give up its NatWest branches in Scotland, as well as its insurance businesses - including Churchill, Green Flag and Direct Line.

There is also talk about what guise the 'new' banks will have. Names in the running include The TSB and Williams & Glyn's, while Northern Rock may too be rebranded as BankCo, according to reports.

Darling (pictured) yesterday told the BBC: 'What I want to do now is begin the process of reform and reconstruction so we have got a safer, more competitive banking system with more high street banks than we have at the moment, with new entrants coming in.'

To ensure the market is more competitive, it is understood that rival banking groups - such as HSBC and Santander - will not be allowed to buy up assets from competitors, although there were reports that Santander would be allowed to bid for RBS's business banking operation as it currently owns just 8% of this market.

Another buyer who could snap up some of the businesses is Virgin Money, while Tesco has also been expanding its retail banking proposition and could be waiting to swoop in for some assets as well.