UPDATE 1-EU to approve KBC restructuring on Thur - sources

* KBC to remain in banking, insurance - source

* Bank to sell KBL European Private Bankers, Fidea, Centea

* Bank to shrink balance sheet by 20-25 pct

* Lender may float part of Czech, Hungarian operations

(Updates with new date for EU decision)

BRUSSELS, Nov 13 (Reuters) - European Union regulators will next week approve KBC's (KBC.BR) restructuring, allowing it to remain in banking and insurance in Belgium and eastern Europe, two sources familiar with the situation said on Friday.

The European Commission is scrutinising whether an injection of 7 billion euros ($10.5 billion) into Belgium's KBC by the Belgian and Flemish regional governments complied with EU state aid rules.

"The Commission's decision on KBC's restructuring plan is due on Thursday," one of the sources told Reuters.

The sources had earlier said the decision would come on Wednesday, after the EU executive's weekly meeting, but later said this had been pushed back a day.

A Commission spokeswoman told a daily briefing on Friday that commissioners would be meeting on Thursday instead of Wednesday due to the EU-Russia summit that day.

"The key message is that KBC has kept its bancassurance model. That is important in the current situation," the source said. Dutch bancassurer ING (ING.AS) last month said it would spin off its insurance activities to soothe EU competition concerns after its bailout by the Dutch government, marking the lender's return to its retail savings bank roots.

KBC's overhaul agreed with the EU's executive Commission will be less drastic than that of ING, the source said.

"It will need to shrink its balance sheet by 20 to 25 percent," the source said. The bank will sell its private banking unit KBL European Private Bankers, its domestic insurance unit Fidea and Belgian retail bank Centea.

"KBC's operations in the Czech Republic and Hungary may be partly listed. There are a number of alternative options to raise capital and this is one of them," the source said.

KBC gave no new details of its restructuring plan when it reported third-quarter results earlier on Friday, posting a greater improvement than expected in net profit. (Reporting by Foo Yun Chee; editing by Dale Hudson and Simon Jessop)