Brussels may force RBS, Lloyds to shed clients-paper

LONDON, Oct 6 (Reuters) The European Commission wants Royal Bank of Scotland (RBS.L) to shed up to 10 percent of its small business customers as the penalty for receiving billions of pounds of state aid, The Times reported on Tuesday.

Without giving sources, The Times said RBS, 70 percent owned by the British government, was resisting the Brussels proposal to give up about 100,000 of its one million small business customers. RBS controls about a third of the market.

The Times reported that Lloyds Banking Group (LLOY.L), 43 percent owned by the government, is under pressure from Brussels to reduce its share of personal accounts. It is the biggest UK player with 22 million customers.

The Times cited some sources as suggesting that Brussels was also looking for a 10 percent cut at Lloyds.

The Times quoted a Lloyds spokesman as saying: "We continue to engage in dialogue with the Treasury and the European Commission."

The newspaper reported RBS as saying: "In keeping with other banks we are working with the Treasury to try and reach a satisfactory outcome with the Commission."

RBS and Lloyds were not immediately reachable for comment by Reuters. (Reporting by Jon Carter; Editing by Gary Hill)