RBS likely to sell insurance arm, other assets: source

LONDON (Reuters) - Royal Bank of Scotland (RBS.L), which is majority owned by the British government, is likely to sell its insurance units and other assets including branches and some investment banking operations, a British government source told Reuters on Friday.

The sales -- which are in line with a British government desire to significantly reduce the size of RBS's balance sheet -- could be announced as early as next week as part of a deal to gain European Union approval for state aid to the firm.

"There's been informal speculation about (divesting) a number of branches in the UK, and possibly some of the riskier types of investment banking activity which we might expect to be scaled back," said the source, who was familiar with the negotiations between RBS, the British government and the European Commission.

"I understand that that speculation is quite well informed. When the eventual agreement is reached, I don't think that insurance will necessarily dominate the deal -- there will be other parts as well."

The source stressed that the government aimed to make the financial service market more competitive for consumers as well as maximize value for taxpayers in any divestment.

(Reporting by David Milliken)