Britain Moves to Sell Stakes in Lloyds Banking Group PLC (LON: LLOY) and Royal Bank of Scotland (LON: RBS)

The U.K. government has hired investment banker Jim O’Neill on Monday to help manage the sale of its stakes in Lloyds Banking Group PLC (LON: LLOY) and Royal Bank of Scotland (LON: RBS), reports the New York Times.

London-based Jim O’Neill will join United Kingdom Financial Investments (UKFI) as the bank’s head of market investments in October. He is currently the head of corporate finance outside of the Americas at Bank of America Corp (NYSE: BAC)’s Merrill Lynch division. He will report to UKFI Chief Robin Budenberg.

O’Neill will add his experience in restructuring and capital markets to the UKFI. At Bank of America Corp (NYSE: BAC)’s Merrill Lynch division, O’Neill led the team advising Lloyds on recapitalization last year totaling several billion pounds, which included one of Brtain’s largest share sales. The offering helped Lloyds avoid surrendering an even bigger stake to the British government.

“I look forward to engaging with Lloyds and RBS to represent the taxpayer’s interest as a shareholder in these institutions,” Mr. O’Neil said in a statement. “Disposing of these stakes in an orderly manner will be among the most important events in the capital markets over the coming years.”

The U.K. government took major stakes in Royal Bank of Scotland (LON: RBS) and Lloyds Banking Group PLC (LON: LLOY) in 2008 to help stabilize the country’s banking industry during the financial crisis. The government owns 83 percent of RBS and 41 percent of Lloyds.

The government will likely not begin divesting its stakes until September 2011, when an independent commission appointed by the new Chancellor of the Exchequer, George Osborne, is due to publish its report on the banking system. The report will discuss a possible split of retail and investment banking operations and could lead to large changes in the U.K.’s banking industry.