By Hugh Pym
Chief economics correspondent
The shake-up follows the near-collapse of Northern Rock in 2007
The pronouncements from Brussels on the future of Northern Rock mark the beginning of a process which could change the face of High Street banking.
Having dealt with the Rock issue, the European Commission will turn its attention to a carve-up of two other government-backed banking groups; Lloyds and Royal Bank of Scotland.
The background to all this is the commission's desire to restore something like a normal playing field for banking.
Taxpayer-funded bailouts saved the banking system a year ago but left the sector distorted by state aid and government guarantees.
The commission wants to substantially reduce the scale of state-supported banks.
Commerzbank and ING are two European players which have already been required to sell off some operations in return for continuing Government involvement.
Now it's the turn of Northern Rock.
The commission has approved a plan for the Rock to be split, with the retail banking operation hived off ready for a private sale.
The government's ideal scenario would see Northern Rock sold off before the election, but with the public sector still holding a big chunk of the Rock's mortgage book
It is understood that the Treasury will not entertain bids from the existing big players on the High Street.
The hope is that a new entrant to the banking market will emerge to take over the Rock. Virgin and Tesco are frequently mentioned as newcomers who might be lining up with bids.
Even more important for the UK banking system will be the commission's decisions on the future of RBS and Lloyds.
It's likely that wide ranging asset sales will be demanded by the commission, with possibly hundreds of branches having to be put up for sale.
The Treasury is trying to make a virtue of this by suggesting that these disposals will attract other new players into the market. Sources have let it be known that two new banks could emerge from this process.
This, it is argued, will boost competition in a High Street market which looks rather too cosy as a result of the Lloyds takeover of HBOS.
The government's ideal scenario would see Northern Rock sold off before the election, but with the public sector still holding a big chunk of the Rock's mortgage book.
A new owner from outside the sector could be billed as an important new competitive force.
Further down the line, the disposal of Lloyds and RBS branches and customer accounts might flush out more would-be bankers and perhaps some foreign entrants to the British market.
Ideal scenarios, though, rarely occur as expected. A prolonged recession and recovery might deter buyers.
A second dip for the housing market could damage a trade sale of Northern Rock, never mind the split of RBS and Lloyds.
These are interesting times in the UK banking market, that's for sure.