By Jason Theodorou

Royal Bank of Scotland has agreed to sell 318 branches to Santander, in a move intended to satisfy the European Commission, who instructed the bank to sell off branches last year after it was partly nationalised by the government.

The bank said in a statement: "RBS announces today that it has agreed to sell 318 branches and associated assets and liabilities to Santander UK plc for a premium of 350 million pounds (557 million dollars) to net assets at closing".

Spanish bank Santander will take over 31 RBS-branded branches within England and Wales, as well as seven NatWest branches in Scotland. Santander already has a major presence on the high street, operating the Abbey, Alliance & Leicester and Bradford and Bingley brands. Altogether it has 1,300 branches within the UK.

RBS chief executive Stephen Hester said: "This is an important milestone in our restructuring work and complements the significant momentum behind our recovery plan overall".

"Santander will be a good owner of these assets. The divestment will make them a stronger competitor in UK banking, especially in the SME (small and medium sized enterprise) and mid-corporate sectors."

RBS is 84% owned by the taxpayer, and was told to sell off a significant number of branches before 2013 by the European Commission in return for the aid it received in the wake of the financial crisis.

The deal is expected to be complete by December 2011, pending regulatory approvals.

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