* UK boss Botin says backs overall Project Merlin objectives
* Appears as Santander CEO Saenz faces threat to position
* Virgin Money CEO keen on investment banking, retail split
* Santander shares rise 4 percent
(Adds comments from Santander UK CEO)
LONDON/MADRID, Jan 18 (Reuters) - The new boss of Santander's British arm told UK lawmakers she intends to take part in a government plan to boost business lending, potentially going it alone rather than as part of a group target.
Ana Patricia Botin, who started as Santander's UK chief executive on Dec. 1 after former boss Antonio Horta-Osorio was poached to run Lloyds Banking Group, said she remained in talks with the government over "Project Merlin", which aims to boost lending and cap pay for bankers.
"We support the overall objectives of Merlin. Our intention is to participate specifically in the lending commitments ... in our own way," Botin said.
The Spanish bank may prefer to sign up for an individual lending target, rather than joining rivals with a group target.
Botin was speaking to lawmakers as part of a probe into industry competition. She said she did not support forcing banks to split investment banking from retail banks.
She was speaking as Santander CEO Alfredo Saenz faced the threat of being forced to step down after Spain's Supreme Court barred him from working as a banker, newspaper El Mundo reported on Monday.
The bank declined to comment on the report, which relates to an earlier conviction for making false accusations when he was chairman of Spanish bank Banesto.
Shares in Santander rose 4 percent by 1130 GMT GMT, outpacing a 2 percent rise in the European index and shares in Banesto, majority owned by Santander, rose 3.9 percent, showing investors were unperturbed by the report.
Saenz could appeal any result of the long-running case in Spain's Constitutional Court, pushing any potential sentence still further out into the future, analysts said.
In any case, the 68-year-old is viewed as ripe for retirement, with a lot of strong talent able to step into his shoes.
"Santander is generally considered to have a deep bench of management talent. There's probably three or four people who could step up and do the job very well," said Simon Maughan, banking analyst at MF Global Securities.
Botin, daughter of Santander Chairman Emilio Botin, would be seen as a strong candidate to replace Saenz. Horta-Osorio had also been tipped as a future CEO.
Jayne-Anne Gadhia, chief executive of Virgin Money, earlier told the committee she supported the separation of investment banking and retail banking to reduce risk-taking.
"It is an extreme solution, but we have seen extreme times," Gadhia said.
Virgin Money, the financial arm of businessman Richard Branson's Virgin Group, is attempting to take on Britain's established big five High Street banks, and has said it is interested in buying 600 Lloyds branches being sold. (Reporting by Steve Slater, Sudip Kar-Gupta and Sarah White in London and Sonya Dowsett in Madrid; Editing by Jon Loades-Carter and Hans Peters)