Lloyds Banking Group, Royal Bank of Scotland and other UK banks appear to be increasingly interested in selling distressed assets or loan portfolios to shrink their balance sheets, restructuring experts said. The moves come as capital rules are expected to make holding such assets more costly. "Anecdotal evidence is that banks are approaching [private-equity] sponsors and are talking to hedge funds about selling the debt," said Matthew Prest, managing director at Moelis & Co. "Obviously still there is an issue about valuation, but [banks] have targets to reduce their loan book, and Basel III will inevitably put further pressure on the banks."

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