Working with Cyprus on UK-based bank branches: Osborne

LONDON (Reuters) - Britain is working with Cypriot authorities to ensure that UK-based branches of Cyprus Popular Bank are not subject to the bailout terms being thrashed out between Cyprus and its international rescuers.

"The Treasury is working with the Cypriot authorities on a British solution to the branch of the Cyprus Popular Bank," Osborne told a parliamentary committee.

"Discussions are taking place at the moment. I can't say a great deal more about them but we are engaged in negotiations to try to avoid the branches in the UK becoming sucked into the Cypriot resolution process."

Cyprus Popular Bank, also known as Laiki Bank UK, has about 13,000 depositors in Britain and operates four branches, offering both private banking and corporate banking.

Britain's financial watchdog has been keen for arms of overseas banks to set up as subsidiaries, rather than branches, following a row over who would reimburse Icesave customers when its Icelandic parent Landsbanki collapsed in 2008.

(Reporting by Christina Fincher, Editing by Olesya Dmitracova)