LONDON, Nov 22 (Reuters) - The British government could face trade sanctions if it is found guilty of protectionism as a result of the bank bail out, Pascal Lamy, director general of the World Trade Organisation, told the Sunday Telegraph.
Lamy said the WTO will likely examine whether countries that bailed out their banks did so on the understanding that the banks should lend more to domestic customers in the future.
If the UK is challenged and found guilty, it could face trade sanctions or be forced to overhaul the semi-nationalised banking system, the paper said.
The warning would also apply to the United States and European countries that have taken similar steps, it said.
Last October the government bailed out three banks - Royal Bank of Scotland, Lloyds TSB and HBOS - with a 37 billion-pound cash injection aimed at strengthening their capital reserves in the face of the credit crunch. RBS and Lloyds Banking Group, Britain's two largest retail banks, secured another 31 billion pounds ($50.5 billion) from the government on Tuesday and agreed to sell branches and key businesses to appease EU competition concerns over state aid. (Reporting by Julie Crust; editing by Jon Loades-Carter) ((julie.crust@thomsonreuters.com; +44 207 542 3847))