Sterling falls on UK banking shake-up; BoE eyed

* Stg down 0.5 pct vs dlr on banking concerns, ahead of BoE

* UK govt announces bank shake-up, takes more RBS B shares

* Lloyds launches record rights issue

* BoE seen raising QE this wk

LONDON, Nov 3 (Reuters) - Sterling fell broadly on Tuesday after the UK Treasury announced a major shake-up of British banks and as investors braced for a possible further extension of quantitative easing by the Bank of England this week.

Under the bank restructuring plans, Royal Bank of Scotland (RBS.L: Quote, Profile, Research) and Lloyds Banking Group (LLOY.L: Quote, Profile, Research) will between them have to sell off businesses equating to 10 percent of the retail banking market.

The government will raise its economic interest in Royal Bank of Scotland while keeeping its ordinary share stake steady and Lloyds launched a record 13.5 billion pound rights issue. [ID:nL3540088]

The shake-up highlights the fragility of the financial sector, which is a key part of the UK economy, and will add to concerns about the country's public finances.