DealBook: R.B.S. Names New Head of British Retail Bank

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British Open Economic Debate Ahead of 2015 Election

The chancellor of the Exchequer, George Osborne, on Monday promised more austerity and further welfare cuts while warning that the task of repairing government finances was “not even half-done.”

That vow followed a call on Sunday by Ed Miliband, the Labour leader and head of the opposition, for better protection for low-wage workers.

Only a year ago, Britain faced the risk of a return to recession, and Mr. Osborne’s austerity program was getting much of the blame. But Britain is now expected to be one of the fastest growing advanced economies in 2014, and that turnaround has left political parties scrambling for advantage at the start of the new year.

While the economic uptick is good news for the Conservative government, led by Prime Minister David Cameron, Mr. Osborne warned against a “dangerous new complacency,” arguing that, if given the chance, the opposition Labour Party would squander the gains made rather than consolidate them.

Despite its claims that austerity has laid the foundation for recovery, the government was put on the defensive late last year when the Labour Party campaigned over the cost-of-living squeeze felt by many voters whose pay increases have lagged behind big jumps in energy and other bills.

Mr. Miliband, writing in the Independent newspaper on Sunday, called for tougher action against unscrupulous firms that he said exploit cheap labor.

Calling for stiffer fines for companies that breach minimum wage laws and a ban on recruitment agencies hiring only foreign workers, Mr. Miliband also sought to defuse the debate over immigration and worries that workers from Eastern Europe were undercutting pay levels.

“Unless we act to change our economy, low-skill immigration risks making the problems of the cost of living crisis worse for those at the sharp end,” Mr. Miliband wrote. “It isn’t prejudiced to believe that.”

Mr. Osborne, speaking on Monday at a factory in Birmingham, sought to put the focus firmly back on deficit reduction, asserting that his economic program “is working,” but that an additional £25 billion in spending cuts will be needed after the next elections, due in May 2015, including £12 billion from the welfare budget.

The speech effectively challenged Mr. Osborne’s opponents to say whether they would match his target and, if so, how they would achieve it — if not through restricting welfare payments.

Mr. Osborne highlighted some potential welfare savings including cuts to housing benefits for people younger than 25, and the new restrictions on subsidized housing for those over certain salary thresholds.

Yet, on Sunday Mr. Cameron made clear that significant increases in the state pension will continue, insulating many older people from the squeeze on public spending. Political parties are wary of upsetting retired people because they tend to vote more than other age groups.

Labour countered Monday that it would focus more on growth as a way to reduce the scale of cuts. “We will get the deficit down in a fair way,” Labour’s finance spokesman, Ed Balls, said in a statement. “We know that the way to mitigate the scale of the cuts needed is to earn and grow our way to higher living standards for all.”

Meanwhile, Nick Clegg, leader of the Liberal Democrats, the junior party in the coalition government, distanced himself from Mr. Osborne’s comments on welfare. The Conservatives are making a “monumental mistake” in a remorseless search for cuts and in focusing the burden of consolidation on the working poor, Mr. Clegg, who is deputy prime minister, said at a news conference on Monday in London.

Although Britain’s next general election is more than a year away, elections for the European Parliament in May this year will provide an earlier test of the parties’ relative popularity with the British public.

As the general election approaches, and with opinion polls pointing to an inconclusive outcome, Mr. Clegg’s party is trying to distinguish its image from that of the Conservatives.

DealBook: British Regulator Plans New Rules for Payday Lenders

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DealBook: New Embarrassment for British Regulator

British Plan on Taxing Gambling Annoys Many in Gibraltar

Officials and executives in the territory’s thriving online gambling industry are crying foul over Prime Minister David Cameron’s plan to impose a 15 percent tax on residents of Britain who place bets on Gibraltar’s dozens of sites.

People here in this tiny outpost, which evokes England with its red phone booths and helmeted police officers, see the proposed tax as an unfair revenue grab by the London government. While Britain is responsible for the territory’s military and international relations, Gibraltar has significant autonomy over trade and industry issues, including the ability to set taxes. What Gibraltar cannot necessarily control is taxes that London imposes on Britons in Britain.

The tax would be “clearly against the common-sense logic of electronic commerce,” said Phill Brear, Gibraltar’s gambling commissioner. He said that about 60 percent of online bets by Britons were placed through Gibraltar sites. “We now hear a lot of talk in the U.K. about creating a level playing field. But you can in fact never level the field between high-street shops and online services.”

The proposed 15 percent tax, the same as that imposed on Britons who bet within Britain, would be a sharp markup from the 1 percent that Gibraltar currently levies. The plan, which Mr. Cameron wants to take effect by December 2014, would also make it compulsory for Gibraltar-based companies to have a British license to serve British clients.

Companies would thus face the same rules as betting-shop operators back in Britain, like William Hill and Ladbrokes. But William Hill and Ladbrokes are also active in Gibraltar’s online wagering industry, meaning they would get ensnared by the new tax.

The change would put “a huge and unwanted cost on our business,” said Steve Buchanan, who heads the Gibraltar operations of Ladbrokes.

Mr. Buchanan added that Gibraltar had other advantages, even if the new gambling tax were adopted. He noted that Gibraltar applied no value-added taxation on advertising and other activities essential to the gambling sector, unlike the 20 percent tax levied in Britain. When Betfair, another British operator, announced its move to Gibraltar in 2011, it said it would save £20 million, or $30 million, annually in taxes.

Before online gambling companies started settling here about 15 years ago, Gibraltar had only one casino, dating from the 1960s. Even now, this promontory of 2.6 square miles, or 6.7 square kilometers, commonly known as the Rock, in no way resembles Las Vegas or other neon-bathed casino capitals. Instead, it looks like a quaint English town — with the added flourish of a colony of macaque monkeys.

But online gambling is big business, as people around the world log on to place all sorts of bets. Recently, there was brisk wagering on the birth date and name of the royal baby and whether the international soccer star Gareth Bale would soon switch teams.

The industry represents about 15 percent of Gibraltar’s $1.89 billion economy, and gambling companies provide jobs for about 2,500 of Gibraltar’s 30,000 residents. Even with the worldwide financial doldrums, the business continues to grow. Four more Gibraltar-based operators entered the field in the last year, raising the total to 25 — each of which might operate several Web sites.

Ladbrokes, like other companies that operate in Gibraltar, manages its online business from a large, nondescript building, where employees sit in front of rows of screens, monitoring the casino games or tracking bets on soccer matches and horse races. Rather than a bookie shop, it looks more like the trading floor of an investment bank.

Now, the industry is gearing up for a fight, setting up a common legal fund to help pay for a court challenge in the European Union. Their argument is that the British tax is a protectionist measure that violates the Union’s free-market rules. Mr. Brear also warned in an interview that the new taxes would encourage gamblers to switch to less regulated online markets in the Caribbean and elsewhere.

“The model of prohibition and higher taxes has been tried before,” Fabian Picardo, the head of the Gibraltar government, comparing gambling tax proposal to the United States’ ban against alcohol from 1919 to 1933. “If the U.K. takes the tax approach that it is proposing,” he said, “it would be devastating for the U.K. itself.”

London sees the matter differently.

When the draft bill was published in December, the government emphasized the need to monitor gambling and the sector’s possible links to organized crime. Philip Graf, chairman of the British Gambling Commission, noted that his agency currently had limited control over “suspicious betting transactions” because it regulated less than 20 percent of online gambling by British consumers, who instead do most of their betting offshore.

“These proposals will ensure that British consumers enjoy consistent standards of protection, regardless of where a gambling business is based,” the British minister for sport, Hugh Robertson, said last year.

British Inquiry Ties 787 Fire to Beacon

Britain’s Air Accidents Investigation Branch, which also called for a broader safety review of similar devices in thousands of other passenger jets, made its recommendations on Thursday after finding signs of disruption in the battery cells of an emergency transmitter on a 787 Dreamliner that caught fire while parked at Heathrow Airport last week.

Most passenger jets do not have fire suppressant systems near the devices, which send out a plane’s location after a crash. If a fire occurred in flight, the British investigators said, “it could pose a significant safety concern and raise challenges for the cabin crew.”

Boeing’s innovative new plane, which cuts fuel costs by 20 percent, is crucial to the company’s future. But the 787 has faced a series of setbacks since its introduction in late 2011.

Another type of battery caught fire earlier this year, prompting the F.A.A. to ground the plane for several months. On Thursday, a Japan Airlines 787 was forced to return to Boston shortly after takeoff. The airline said an indicator had suggested maintenance might be needed on the fuel pump, and the pilots, who were headed for Japan, turned back as a precaution.

The British findings stirred up an immediate debate, as various players in the aviation community sought to determine if the emergency transmitters posed enough of a safety threat to temporarily dismantle or remove them.

Although Britain is still investigating the cause of the fire at Heathrow, Boeing said it supported the recommendations as “reasonable precautionary measures.” Honeywell Aerospace, which makes the 6.6-pound transmitters on the 787, said the proposals were “prudent,” though it remained “premature to jump to conclusions” about the cause of the fire.

Thomson Airways in England said it would remove the batteries from its 787s. Other carriers that use similar transmitters, from major airlines to corporate jets, were left to decide whether it was safe to keep using them. The F.A.A. decided it needed more time to evaluate the proposals, which could conceivably lead to the removal of the batteries or the transmitters from most of the planes made by Boeing, Airbus and the smaller companies that make regional and business jets.

Federal officials said the lack of definitive evidence about the cause of the fire — and the fact that none of the transmitters had been known to cause a fire in more than 50 million flight hours — suggested they should take more time in reviewing the matter.

While some industry officials were surprised that the agency did not embrace the British recommendations more readily, Hans J. Weber, the president of Tecop International, an aviation consultancy in San Diego, said: “That’s just the way bureaucrats work. There’s always so much harrumphing, like, ‘You can’t tell us what to do. We will make up our own mind.’ ”

Still, he said, American regulators could end up issuing an advisory to plane owners to at least inspect the transmitters.

Robert Mann, an aviation consultant in Port Washington, N.Y., said the agency has to consider what it would mean for safety if planes fly without the transmitters, which have been particularly helpful in locating the wreckage of smaller planes.

The British recommendations, contained in a three-page interim report on the fire investigation, provided the strongest evidence yet that the emergency locator transmitter played a significant role in the fire on the Ethiopian Airlines 787. The findings were good news for Boeing because the fire most likely centered on a generic piece of equipment that is on many types of planes rather than one of the new systems on the Dreamliner.

DealBook: British Government Takes Step in Selling Stakes of Bailed-Out Banks

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BT Group Chief Resigns to Join British Government

Mr. Livingston, 48, will leave BT in September after five years in the job and will be replaced by Gavin Patterson, chief executive of its consumer division, BT Retail, in September, the company said in a statement.

Mr. Livingston said leaving BT “has been an incredibly hard decision” but that “the opportunities ahead and the strength of the management team that Gavin will lead mean that the company is in a great position.”

BT shares, which had recently reached their highest level since 2007, fell 2 percent in London after the announcement.

Under Mr. Livingston, BT heavily invested in pay television by starting its own sports channels to compete with rivals including British Sky Broadcasting. The company also reduced costs, tackled its large pension deficit and replaced old copper cabling with more efficient fiber-optic broadband lines for Internet connections.

On the strength of customer demand for high-speed Internet service, BT surprised analysts last month by announcing an unexpectedly strong, 21 percent increase in fiscal fourth-quarter pretax profit.

As trade minister, Mr. Livingston will be responsible for attracting investment to Britain and helping British companies fuel the economic recovery. He will take over from Stephen Green, a former chairman of the British bank HSBC, who is retiring. Mr. Livingston will not receive a salary as minister but will become a member of the House of Lords.

In a statement on the government Web site, Prime Minister David Cameron called Mr. Livingston an “outstanding business leader” who will help to “open new trade links and grow our exports.”

Mr. Patterson, 45, joined BT in 2004 as managing director of its consumer division. Before that, he worked as European marketing director at the consumer goods company, Procter & Gamble. He became chief executive of BT Retail, which sells services to private households and small businesses, in 2008.

“We have great opportunities ahead and are well placed to take advantage of them,” Mr. Patterson said in a statement. “The company is in a strong place.”

BT’s chairman, Michael Rake, said Mr. Patterson had been closely involved in creating BT’s strategy and was “the right person to take it forward.”

“We have a fitting and experienced successor in Gavin Patterson,” he said. “He has a detailed knowledge of all parts of our business and a track record of success.'’

BT Retail contributed about 31 percent of the entire company’s pretax profit in the fiscal year that ended on March 31. Earnings before interest, tax, depreciation and amortization at BT Retail rose to 1.9 billion pounds, or $3 billion, in 2013, up from 1.8 billion pounds in 2012.

Overall, BT Group had revenue for the year of 18.25 billion pounds, or $28.6 billion.

British Village Protests Plan for Shale Gas Drilling

What brought them together on Thursday evening, though, was not a spring fair but deep worry. Cuadrilla Resources, a British energy company, is on the verge of drilling an exploratory oil well just down the road. Villagers see it as a possible precursor to the environmentally controversial drilling technique known as hydraulic fracturing, or fracking.

“Don’t frack my future,” read the children’s T-shirts as the youths munched on chocolate cupcakes.

The villagers “are going through the grief process; they have just been told they have cancer,” said Alison Stevenson, chairwoman of the Balcombe Parish Council, a local government body. A recent survey conducted by the parish council found that more than 80 percent of the 284 respondents wanted the council to oppose fracking.

The protest was in keeping with the steady resistance that oil and gas companies, and the governments that approve their exploration, are facing as they try to tap underground rock deposits in populated areas to extract fossil fuels. The Balcombe site is limestone, but Cuadrilla and energy companies elsewhere are using similar drilling techniques in efforts to produce oil and natural gas from shale rock.

Although shale gas extraction has created an energy boom in the United States, many Europeans have been reluctant to accept the technology on concerns that it could contaminate groundwater and encourage continued reliance on carbon-emitting fossil fuels.

Balcombe, with about 1,800 residents, is no hotbed of radicalism. It is in the Conservative Party’s heartland, about a half-hour’s train ride south of London. It is represented in Parliament by Francis Maude, a cabinet minister.

But residents say their opposition to fracking, the process of pumping large quantities of liquid, sand and other substances to release gas trapped inside rocks, is not being heard in official circles.

“This is naturally a very conservative, wealthy village,” said Lawrence Dunne, a physics professor who lives here. “But we feel the government is completely ignoring us.”

On this evening, Cuadrilla, the company that is spearheading shale gas development in Britain, was trying to listen. In a former church known as Bramble Hall, the company held a “drop-in session” for local residents.

Several Cuadrilla executives accompanied by an entourage of public relations aides talked to small groups of residents, who were joined by environmental activists from London and the surrounding area.

Francis Egan, Cuadrilla’s chief executive, called the gathering, which attracted more than 200 people and lasted more than four hours, “really, really valuable.” The encounter gave people “an opportunity to hear from us what we are doing” rather than what they “read on the Internet,” he said.

He and other European business leaders who advocate shale gas development are envious of the head start achieved by their American counterparts. But they know that on this side of the Atlantic, fears of pollution run so deep in the grass roots that local and national politicians are hesitant to endorse drilling.

France has a ban on fracking, and Germany is unlikely to give it a green light until after the coming elections. The British government views shale gas as a possible replacement for the declining energy reserves in the North Sea, but those intentions have been slow to translate into action. It is unlikely that there will be any shale gas fracking in Britain this year.

On Thursday, Balcombe was a microcosm of European concerns. Many minds seemed already set against the energy company — a result, some local people said, of heavy campaigning by opponents of fracking.

This article has been revised to reflect the following correction:

Correction: May 25, 2013

Because of an editing error, an earlier version of this article referred erroneously to the type of exploratory well Cuadrilla Resources, a proponent of shale gas development, intends to drill in Balcombe, England. It is an oil well, not a shale gas well — although the drilling techniques that may be employed are the same ones energy companies typically use to extract shale gas.

British Study Raises Warning on Scottish Banks

LONDON — An independent Scotland could find its banks too big to rescue in the event of another crisis, according to a British government report that compares the Scottish financial sector to those of debt-laden Iceland and Cyprus.

The document, to be published Monday, is the latest of three studies by the British government meant to sway opinion in Scotland ahead of next year’s planned referendum there on independence.

Last month the British government suggested that an independent Scotland would not be able to keep the pound sterling and would have to either adopt its own currency or embrace the euro.

The new study, a summary of which was made available ahead of publication, highlights the size of Scotland’s banking sector — much of which had to be rescued by British taxpayers after the financial crash — relative to the rest of the Scottish economy. The sector stands at 1,254 percent of Scotland’s gross domestic product, compared with banking assets in Britain worth 492 percent of G.D.P., the Treasury document says.

“By way of comparison, before the crisis that hit Cyprus in March 2013, its banks had amassed assets equivalent to around 700 percent of its G.D.P. — a major contributor to the cause and impact of the financial crisis in Cyprus and the ability of the Cypriot authorities to prevent the systemic effects when it hit,” the study says.

The document adds that by the end of 2007 Icelandic banks had amassed consolidated assets equivalent to 880 percent of Icelandic G.D.P.

It cites the verdict of the Organization for Economic Cooperation and Development, which said that “the banks grew to be too big for the Iceland government to rescue.

“Banking in these circumstances became very dangerous when the global financial crisis deepened,” it said.

The study says that “a serious banking crisis in an independent Scotland could pose a significant risk to Scottish taxpayers,” with the potential economic fallout amounting to about 65,000 pounds ($98,600) per capita.

The paper concludes that Scottish banks could either have to accept higher risks and costs associated with volatility or restructure and diversify their assets.

John Swinney, finance secretary of the Scottish government, which supports independence, dismissed that document as “a discredited, feeble attempt to undermine confidence in Scotland’s ability to be a successful independent country” adding that “it will not work.”

Mr. Swinney said that he had viewed a leaked draft of the paper and that much of it “seems to be based on a flawed, outdated view of the world which takes no account of the substantial banking reforms which have been ongoing across Europe since 2008.”

The Treasury’s study counted Scottish banks as all those registered in Scotland, including the Royal Bank of Scotland — but excluding NatWest, which is part of the group but is registered in London, and excluding assets of RBS’s foreign subsidiaries.

Bank of Scotland, which is part of the Lloyds Banking Group, is included as a Scottish institution as it is registered in Scotland.

Untangling Scotland’s banks from the broader British financial sector would be a highly complex task were Scots to vote for independence, because both RBS and Lloyds Banking Group were bailed out by British taxpayers after the financial crash.

The British government owns 80 percent of RBS and 40 percent of Lloyds, which are both run from London. That would almost inevitably require some changes in ownership in the event of independence.

Nevertheless the Treasury’s study argues that the total support provided to RBS in 2008 would have been the equivalent of 211 percent of Scotland’s G.D.P. By contrast the total British interventions across the whole banking sector were 76 percent of the country’s G.D.P.

The document also adds that any attempt at shared regulatory arrangements between an independent Scotland and the continuing United Kingdom would be “significantly more complex than those that currently exist” and would be likely to increase the costs for firms of complying with this regulation.

Fitch Puts British Debt on Review for Downgrade

LONDON — Britain’s economic troubles took a turn for the worse on Friday as Fitch Ratings came a step closer to becoming the second agency to strip the country of its triple-A investment grade.

Fitch put the debt on watch for a possible downgrade just days after the release of gloomy government economic data. The figures showed that British debt would “peak later and at a higher level than previously expected by Fitch,” the agency said on its Web site.

The change came a month after Moody’s Investors Service lowered its investment rating for British debt, knocking it to Aa1 from Aaa, saying that one of the principal factors was the very slow pace of the British recovery.

Fitch said Friday that “the persistently weak performance of U.K. growth, in part due to European growth, has increased uncertainty around the U.K.’s potential output and longer-term trend rate of growth with significant implications for public finances.”

Credit downgrades together with a weaker economic outlook could prompt some holders of British bonds to sell their holdings. Government bonds have benefited from the economic turmoil in the euro zone, which had made them more attractive to foreign investors.

The Fitch announcement followed a gloomy speech by George Osborne, the chancellor of the Exchequer, in Parliament on Wednesday. He said that economic conditions remained difficult and that it would take longer than expected to meet his debt-reduction target.

Citing figures from the Office for Budget Responsibility, an independent economic forecasting group, he said the British economy would grow 0.6 percent this year, half of the 1.2 percent forecast earlier. Growth next year is expected to be 1.8 percent, down from a previous estimate of 2 percent, according to the office.

Public-sector net debt as a percentage of gross domestic product would start falling only in the fiscal year ending in 2018. That is a year later than Mr. Osborne forecast in December, when he pushed the goal back to 2017 from 2016.

To help generate growth, Mr. Osborne pledged to divert some of the proceeds of a far-reaching cost-cutting program to lend to home buyers, helping them with deposits for newly built houses. He is also relying on the Bank of England to keep interest rates low for longer even as inflation continues to hover above the central bank’s 2 percent target.

Mr. Osborne is relying on the Bank of England and the housing market to help create the economic upturn he needs to meet his debt targets.

He played down the importance of the Moody’s downgrade, saying it was just another sign of how important its deficit-cutting strategy was. Moody’s decision was “disappointing news,” he said, but it also showed that “Britain cannot let up dealing with its problems” and that “if we abandon our commitment to deal with that debt problem, then our situation will get very much worse.”

Landon Thomas Jr. contributed reporting.

British Recovery Plan Threatened by Weak Growth

The Office for National Statistics said government borrowing in October was £8.6 billion, or $13.7 billion, compared with £5.9 billion ($9.4 billion) in October 2011. Corporate tax receipts were down 9.5 percent while spending on social benefits increased 7.7 percent from October 2011.

Although Britain emerged from recession in the third quarter, with a 1 percent increase in economic growth, analysts have cautioned that that was distorted by special factors like the Olympic Games and that the outlook for growth remained feeble.

The figures Wednesday support that thesis, suggesting that the chancellor of the Exchequer, George Osborne, will struggle to hit his target of limiting borrowing for 2012-13 to £120 billion ($191 billion). In the longer term some analysts say they also believe that Britain’s prized AAA credit rating is at risk.

Sam Hill, fixed-income strategist for Britain at RBC Capital Markets, said in a note that borrowing for October had exceeded the consensus expectation of £6 billion ($9.5 billion).

“With data for seven months of the fiscal year now in, the government have borrowed 61 percent of the full year target of £120 billion, about four percentage points higher than trend over the last three years,” he said. “We believe this is consistent with our forecast for an upward revision to the £120 billion borrowing target of £5 billion.”

The lack of clear signs of a return to robust economic growth remains the main concern for most analysts.

“The underlying story of this year is tax receipts coming in weaker than expected,” said Robert Wood, chief economist for Britain at Berenberg Bank in London. “That’s because growth has stalled.”

Mr. Wood said it remained “touch and go” as to whether the government would meet its deficit reduction targets.

“I still think that the credit rating is more likely than not to be downgraded over the next few years,” he added.

The government argued that the figures indicated that it was keeping control of spending.

“The economy is healing, but it still faces many challenges,” said a spokesman for the Treasury, who in line with policy asked not to be identified. “These numbers illustrate that, but also show the government’s plans to bring spending under control are on track for the year.”

The spokesman said that corporate tax receipts were affected by lower-than-expected energy production from the North Sea.

In a separate development, minutes of the last meeting of the monetary policy committee of the Bank of England revealed divisions at the central bank over how to manage a return to growth, with one member calling for more economic stimulus.

David Miles argued that an asset-buying plan, intended to improve growth, could be increased by £25 billion ($40 billion) without stoking inflation. But the committee, which has already pumped £375 billion ($597 billion) into the economy via such quantitative easing, elected not to expand the program.

The panel also discussed reducing the benchmark interest rate from its record low of 0.5 percent, but unanimously voted not to change it.

DealBook: Barclays to Buy British Retail Unit from ING

Andy Rain/European Pressphoto AgencyA branch of Barclays in London.

LONDON – Barclays agreed on Tuesday to buy the British savings and loan business of the Dutch firm ING Group.

The deal reflects Barclays shifting focus toward retail banking after a recent rate-manipulation scandal led to the resignation of its former chief executive, Robert E. Diamond Jr. The firm’s new chief, Antony P. Jenkins, previously ran the bank’s retail banking operations, and he has said that he will stop business activities that pose a “reputational risk” to the British bank.

Last week, Barclays announced a broad reorganization of its investment banking unit, the group at the center of the rate-rigging case. Hugh E. McGee III, one of the firm’s top deal makers, became its most senior corporate and investment banker in the Americas, while Eric Bommensath was tapped to run a combined fixed-income and equities sales and trading division.

Under the terms of the deal announced on Tuesday, the British bank will acquire deposits of £10.9 billion ($17.5 billion) and mortgages worth a combined £5.6 billion from ING Direct U.K. The acquisition also will add 1.5 million customers to its existing 15 million client base, according to a Barclays statement.

The British bank will acquire ING Direct U.K.’s mortgage book at a 3 percent discount, while the deposits will be acquired at par value, the firms said in separate statements.

“The acquisition of ING Direct U.K. is a good fit with Barclays’s existing U.K. retail banking business,” Ashok Vaswani, head of the British retail and business banking unit of Barclays, said in a statement.

The deal, which is expected to close in the second quarter of 2013, will result in a net loss of 260 million euros ($336 million) for ING. The Dutch bank added that the loss would be offset by 330 million euros of extra capital that would be freed up when the deal is completed.

ING has been required to dispose of assets around the world as part of a bailout from its local government during the financial crisis. Last month, ING sold its 9 percent stake in Capital One though a public offering worth around $3 billion.

DealBook: British Regulator Unveils Libor Overhaul

Carl Court/Agence France-Presse — Getty ImagesMartin Wheatley, managing director of Britain’s Financial Services Authority, said London’s reputation as a global center for financial services had been tarnished by the Libor scandal.

LONDON – A leading British regulator officially unveiled the government’s plan to overhaul the rate at the center of the manipulation scandal, but conceded that problems could still persist.

On Friday, Martin Wheatley, the managing director of the Britain’s Financial Services Authority, the British regulator, acknowledged that regulators should have stepped in sooner to fix the problems with the London interbank offered rate, or Libor. He also confirmed the broad strokes of the proposal, which came after a three-month review.
British authorities, which will provide more oversight, want to make it a criminal offense to alter the rate for financial gain. They also plan to implement new auditing systems to ensure traders cannot unfairly profit from small changes to Libor.

“There’s always a possibility for collusion,” Mr. Wheatley told an audience at Mansion House, the 260-year-old home to the lord mayor of London that is adorned with gilded statues and chandeliers. “But under the new regulatory structure, people would be taking a high risk.”

The proposed changes come amid an investigation into potential rate-rigging at big global banks like HSBC, UBS and JPMorgan Chase. In June, the British bank Barclays agreed to pay $450 million to settle allegations that some of its traders tried to manipulate Libor for financial gain. The firm was also accused of understating its rates submissions to make the bank appear healthier during the financial crisis.

Mr. Wheatley, who will lead the Financial Conduct Authority, a new British regulator that will become part of the Bank of England next year, said London’s reputation as a global center for financial services had been tarnished by the recent scandal.

In response, the country’s authorities have stripped the British Bankers’ Association, the London-based trade body that currently oversees Libor, from its powers to control the rate. A new administrator will be appointed over the next 12 months.

Organizations will be able to start pitching for the position next week. The data providers Bloomberg and Thomson Reuters, which collects the daily Libor submissions on behalf of the British Bankers’ Association, as well as NYSE Euronext have expressed interest in taking on the role. Users of Libor will still pay for the financial information, Mr. Wheatley said on Friday.

Regulators are aiming to improve the accuracy and reliability of Libor, which measures the rate at which banks lend to each other. To do so, they want banks to base the rate submission on actual market transactions whenever possible.

As part of that effort, authorities are planning to focus on fewer markets that are the most liquid. Five of the current 10 currencies, including the Swedish krona and Canadian dollar, will be removed over the next 12 months. The number of rates also will be reduced to 20, from 150.

British regulators will take a more hands-on approach with the rate. They plan to audit banks’ daily Libor submissions to avoid rate manipulation.

Even so, Libor will not be immune to manipulation. Because of limited interbank lending activity, Mr. Wheatley said, sometimes the rates would have to be based on a level of judgment from banks on what interest rates they would be able to secure from other firms.

“There’s still a risk,” he said.