Burt lined up for chairman's role as broker plans to create new bank

A TOP City financial analyst is planning to set up his own bank, with former Bank of Scotland chief executive Sir Peter Burt as chairman.

Sandy Chen, of stockbroker Panmure Gordon, is also believed to have enlisted the help of other businessmen to try to raise money in the City to buy banking assets to form the nucleus of the new bank.

It is believed the broker is looking for about 100 million to get the bank off the ground and that this could lead to a flotation of the new company, with the timing dependent on the enthusiasm of the City to the idea.

Sources said the strategy of Chen and his associates was to try to attract affluent customers to place their deposits with the new bank, and then use that money to lend out to small and medium-sized businesses, a business area Chen sees as providing a good investment opportunity.

One source said: "These guys are not looking for millionaires. It is not going to be another Coutts. More someone with, perhaps, typically 20,000 to invest."

However, it is understood that an approach to Royal Bank of Scotland to see whether RBS would consider selling its smaller private banking businesses, including Adam & Co and Drummonds, was turned down.

RBS split its operations into core and non-core operations earlier this year, the latter due to be run down or sold, but it is understood private banking was identified as a core activity by new chief executive Stephen Hester.

RBS and Chen were not available for comment yesterday.

It is believed Chen, who is thought to have the backing of Panmure, has looked at the possibility of picking up banking assets from the likes Lloyds Banking Group and Northern Rock.

One analyst said: "There's strong speculation the European Commission will force Lloyds and RBS to get rid of some assets in return for the state aid both of them have received.

"One scenario might be for Chen and his backers to pick up some bricks-and-mortar branches from Lloyds, ie Halifax and Cheltenham & Gloucester branches, and then take over some of RBS's big share of the small business lending market on the back of that."

Burt and Chen are understood to believe the current situation of the banks, gingerly recovering after nearly two years of turmoil and balance sheet fragility, yields an almost unprecedented opportunity for a new niche competitor to enter the market.

It is believed the Financial Services Authority and the Treasury have already been informed of their plans, with Burt's name adding a lot of credibility to the exercise given his elder-statesman status in the sector.