Nov. 4--Royal Bank of Scotland will be hanging on to Citizens Bank.

RBS -- which was under pressure from European regulators to sell off valuable units -- said yesterday it reached a deal that will allow it to keep Providence-based Citizens, the second largest bank in Massachusetts.

The giant UK bank will be forced to divest some of its British branches and insurance units, under a bailout agreement reached with regulators. But RBS, which views Citizens as a key holding, said its ownership of Citizens is no longer in doubt.

"Today's announcement once again affirms that (Citizens) is a valued part of the RBS Group," Ellen Alemany, chairwoman and chief executive of Citizens Financial Group and RBS Americas, said in a statement. "We will continue to serve the needs of our customers and execute on our long-term strategic plan."

On Monday, RBS sparked widespread speculation about Citizens' future, after it acknowledged that regulators in Europe were pressuring it to sell off some of its holdings. A major recipient of government money in Britain, RBS has been reeling for a year now due to the global financial crisis.

Virgin Airlines founder Richard Branson was among those hovering over RBS and other UK banks. Branson may yet get some divested bank holdings for his planned Virgin Bank.

But he won't be getting the prized Citizens, which has about $150 billion in assets and 1,250 branches in 12 states in America.

-----

To see more of the Boston Herald or to subscribe to the newspaper, go to http://www.bostonherald.com.

Copyright (c) 2009, Boston Herald

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

A service of YellowBrix, Inc.