UPDATE 1-Corsair front runner in RBS branch sale -sources
* Decision set to be rubber-stamped by executives Friday
* Corsair/Centerbridge plan has Church of England backing
* Corsair set to edge out Blackstone/Anacap proposal
LONDON, Sept 20 (Reuters) - A consortium led by private equity firm Corsair has emerged as the front runner to buy 315 branches being sold by Royal Bank of Scotland, three sources with knowledge of the deal told Reuters.
A final decision has yet to be made, and rival bids from a Blackstone-led consortium and from W&G Investments, a group of investors fronted by former Tesco executive Andy Higginson have not been formally ruled out, sources said.
U.S.-based Corsair is bidding along with fellow private equity house Centerbridge and other investors including the Church of England's investment fund and Standard Life Investments.
RBS was ordered to sell the business, which focuses on lending to small business and has assets of about 20.5 billion pounds, in return for receiving a 45.5 billion pound ($73.1 billion) bailout during the 2008 financial crisis.
But the sale process, dubbed Project Rainbow, suffered a setback in October when Santander pulled out of a deal to buy the branches for 1.65 billion pounds.
Corsair's proposal will see it invest between 600 million and 800 million pounds to become a cornerstone investor ahead of a stock market flotation that would value the new bank at more than 1.5 billion pounds.
The Blackstone-led consortium produced a proposal which was structured in a similar manner while W&G wanted to buy the business outright.
RBS executives considered W&G's offer of between 1.1 billion and 1.5 billion pounds undervalued the business and the auction became a 2-horse race in recent weeks, sources said. RBS was also keen to retain a stake in the business to share in future upside, they said.
RBS, Corsair, Blackstone and W&G declined to comment.
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